UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                            ------------------------

                                    FORM 10-K

              (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended September 30, 2000
                                       or
              ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                           Commission File No. 0-13143
                            ------------------------

                                  INNOVEX, INC.
             (Exact name of registrant as specified in its charter)

Minnesota                                                    41-1223933
(state or other jurisdiction of                              (IRS Employer
incorporation or organization)                               Identification No.)

           5540 Pioneer Creek Drive, Maple Plain, Minnesota 55359-9003
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (763) 479-5300

                            ------------------------

          Securities registered pursuant to Section 12(b) of the Act:
                                      None

          Securities registered pursuant to Section 12(g) of the Act:

                                (Title of Class)
                          Common Stock ($.04 par value)

                            ------------------------

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes (x) No ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (S229.405 of this chapter) is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ( )

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $176,553,000 at November 24, 2000 when the closing
sale price of such stock, as reported in the Nasdaq National Market System, was
$12.50.

The number of shares outstanding of the Registrant's Common Stock, $.04 par
value, as of November 24, 2000 was 14,980,213 shares.

Documents Incorporated by Reference:

1. Portions of the Registrant's Proxy Statement to be filed with the Commission
within 120 days after the end of the Registrant's fiscal year are incorporated
by reference into Part III of the Form 10-K.


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                                  INNOVEX, INC.
                                 2000 FORM 10-K

                                     PART I

ITEM 1. BUSINESS

(a) GENERAL DEVELOPMENT OF BUSINESS

On August 9, 1999, Innovex, Inc. and its subsidiaries (the "Company")
consummated the purchase of approximately 76% of the outstanding shares of
ADFlex Solutions, Inc. ("ADFlex") at a purchase price of $3.80 per share subject
to a tender offer. The remaining approximately 24% of ADFlex issued and
outstanding common stock not tendered in response to the tender offer was
acquired by the Company through a merger transaction completed on September 14,
1999. The total ADFlex purchase price, including transaction costs, change in
control payments and all of the issued and outstanding common stock was
approximately $37 million. The Company also obtained credit facilities totaling
in principal amount $40 million, which were utilized to refinance ADFlex's
outstanding debt, pay down current liabilities and pay related transaction
costs. Prior to the acquisition, ADFlex was a leading supplier of flexible
circuit based solutions to the computer, computer peripheral, communications and
consumer electronics industries. Applications for these flex-based interconnects
include cellular phones, hard disk drives, other storage systems, high-end
consumer products, notebook computers, pagers and personal communication
systems. ADFlex's diverse customer and industry base has reduced Innovex's
reliance on the disk drive industry.

Prior to the ADFlex acquisition, the Company had one primary operating group,
Innovex Precision Components. The Company has combined the newly acquired ADFlex
operation into its existing operations as both operations design and manufacture
flexible circuits.

Prior to fiscal 1999, the Company operated through three divisions, Precision
Products (Precision), Litchfield Precision Components (LPC) and Iconovex. Each
division had its own administrative, engineering, manufacturing and marketing
organizations. During the quarter ending September 30, 1998, the Company
combined the operations of its two core operating divisions, Precision and LPC
into one operating division, Innovex Precision Components. The combination
merged the rapidly growing LPC flexible circuit fabrication and chemical etching
operations with Precision's high volume fine wire manufacturing expertise. The
combination also allowed Innovex to leverage Precision's disk drive industry
market and trade knowledge to disk drive industry flexible circuit applications
as the industry transitioned from wire interconnects.

Prior to the divisional combination, the largest division, Precision, developed,
engineered and manufactured specialty precision electromagnetic products for
original equipment manufacturers ("OEM's"). Lead wire assemblies for the thin
film disk drive market were the division's primary product. Lead wire assemblies
are fine twisted magnet wires that connect the back end electronics of a disk
drive with the inductive or magneto resistive thin film heads that read and
write information on the disk. Since the divisional combination, the lead wire
assembly revenue declined as anticipated. As a result, during the fiscal 1999
fourth quarter, charges of $2.8 million were recorded to account for the
discontinuance of this product line.

LPC, prior to the fiscal 1998 divisional combination, designed and manufactured
highly complex flexible circuitry and chemically machined components for
computer, computer peripheral, medical and other applications. The Company
purchased Litchfield Precision Components, Inc. on May 16, 1996. This
acquisition reduced the Company's reliance on the disk drive industry while
providing an entry into the large and rapidly growing flexible circuit market.
Innovex's flexible circuit operation is one of a limited number of operations in
the world able to produce flexible circuits with line and spacing tolerances of
less than 2 mils for the high-end portion of the flexible circuit market.

Innovex was founded in 1972 to acquire the assets of a manufacturer of needle
and wire assemblies used in computer core memories. With the introduction of
solid state memory devices, needle wire assemblies became obsolete and, in late
1973, the Company moved into related areas of manufacturing utilizing and
expanding its micro-welding and miniature assembly expertise. In 1984, the
Company expanded its scope to the photo equipment market by acquiring Lucht
Engineering. The Company sold its photo business in two stages beginning
November 29, 1992 with the remaining portion sold November 1, 1993.

In an attempt to diversify, the InnoMedica Division was formed in late fiscal
1993 to develop the Company's emerging medical business. This Division, which
produced an immaterial portion of the Company's revenue, was sold on June 1,
1998.

The Iconovex subsidiary was established in fiscal 1994 to market and further
develop a technologically advanced software product purchased in November 1993.
In October 1997, Iconovex became the 51% owner of a joint venture with Solutions
Corporation of


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America. The operations of Iconovex and its joint venture, Smart Solution, were
discontinued in June 1999 as a result of revenue not developing as expected and
the Company recorded a $1.7 million charge related to this disposition.

Innovex, Inc. was incorporated under the laws of the State of Minnesota in 1972.
Its principal executive offices are located at 5540 Pioneer Creek Drive, Maple
Plain, Minnesota 55359-9003 and its telephone number is (763) 479-5300. Products
are developed and manufactured through the Company's wholly owned subsidiaries,
Innovex Precision Components, Inc., Innovex Southwest, Inc., Innovex (Thailand)
Ltd. and Innovex Limited. Innovex Precision Components, Inc. and Innovex Ltd.
are Minnesota corporations. Innovex Southwest, Inc. is a Delaware corporation
and Innovex (Thailand) Ltd. is a Thailand corporation.

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Prior to the ADFlex acquisition, the Company had one major operating unit during
fiscal 1999. The Company has combined its business lines into one operation that
manufactures and markets flexible circuits to various industries. Financial
results will be presented as a single segment due to the immaterial nature of
the non-core operations. Topics covered throughout this document may be
discussed referencing former separate operations where helpful to the reader's
understanding.

(c) NARRATIVE DESCRIPTION OF BUSINESS

COMPANY OVERVIEW
Innovex is a leading worldwide provider of flexible circuit interconnect
solutions to original equipment manufacturers ("OEMs") in the electronics
industry. The Company offers a full range of customized flexible circuit
applications and services from initial design, development and prototype to
fabrication, assembly and test on a global basis. The Company targets
high-volume markets where miniaturization, form and weight are driving factors
and flexible circuits are an enabling technology. Applications for flexible
circuits currently addressed by the Company include notebook computers, portable
communication devices such as cellular telephones and pagers, data storage
devices such as hard disk drives ("HDDs"), tape drives and arrays and high-end
consumer electronics products such as compact disk players. The Company's
principal customers include Acer, Alps, Compaq, Dell, Digital Equipment, IBM,
Iomega, Maxtor, Motorola, Nokia, Philips, Qualcomm, Quantum, ReadRite, SAE
Magnetics, Samsung, Seagate, StorageTek, Xerox and other leading electronic
OEMs.

Flexible circuits consist of copper conductive patterns on flexible substrate
materials, such as polyimide, and provide electrical connection between
components in electronic systems. Flexible circuit interconnects frequently
incorporate components such as integrated circuits ("ICs"), connectors,
stiffeners, resistors and capacitors mounted directly on a flexible circuit.
With proliferation of electronic applications, electronic products have become
smaller, lighter and more portable. To meet the challenges represented by the
increased complexity of miniaturization, form and weight requirements, OEMs have
increasingly turned to flexible circuit interconnect solutions because they
decrease the weight and expense of connectors and other packaging components,
conform to contoured, ergonomic shapes or small spaces and provide mechanical
flexure. The Company's products consist of flexible circuits with high to
mid-range tolerances and may include other secondary finishing or assembly
operations. The high-end flexible circuits generate the highest gross margin
percents. The mid-range or standard flexible circuits with components added
through the performance of additional assembly steps garner lower gross margin
percents due to higher material costs and the increased number of competitors.

Historically, the Company's wire operations produced a variety of small lead
wire assemblies primarily for computer disk drives. The disk drive industry has
transitioned away from lead wire assembly interconnects to integrated
interconnects such as the Company's Head Interconnect Flex ("HIF"), Flex
suspension assembly ("FSA") and BridgeFlex ("BFC") products. This transition has
had a significant impact on the Company's operations over the last three years
as it has had to manage the rapid increase in its flexible circuit business
while controlling the rapid drop in its lead wire assembly operations. Lead wire
assembly sales constituted less than 1% of fiscal 2000 consolidated revenues,
26% of fiscal 1999 revenues and over 72% of fiscal 1998 revenues.

While the trend toward miniaturization and portability increases product
complexity, electronic OEMs face escalating time to market, cost and global
sourcing requirements. In response, the Company has established manufacturing
facilities in Thailand that have lower cost structures and closer proximity to
the Company's OEM customer base. The Company believes it is a preferred supplier
for the majority of its customers' high-end and high-volume flexible circuit
interconnect requirements.

INDUSTRY OVERVIEW AND TRENDS
Flexible circuit interconnects provide electrical connection between components
in electronic systems and are increasingly used as a platform to support the
attachment of electronic devices. Flexible circuits offer several advantages
over rigid printed circuit boards ("PCBs") and ceramic hybrid circuits,
particularly for small, complex electronic systems. Flexible circuits, due to
their mechanical flexure and three-dimensional shape, accommodate packaging
contours and motion in a manner that traditional two-dimensional rigid PCBs
cannot. Flexible circuits also provide improved thermal dissipation and signal
propagation as compared to PCBs. In addition, flexible circuits can reduce the
size, weight and expense of: (i) the primary substrate for component attachment
when flexible circuits are used in place of a PCB; (ii)


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connectors, cables and other interconnection schemes when flexible circuits
provide the connection to other substrates or subsystems within the system; and
(iii) individual IC die packages by bonding an IC directly to a flexible chip
carrier rather than a ceramic or plastic package.

These capabilities enable circuits to solve many of the challenges faced by
electronic OEMs who currently use traditional interconnection devices. Products
which currently use polyimide flexible circuit interconnect assemblies include
notebook computers, portable communication devices such as cellular telephones,
pagers and personal digital assistants ("PDAs"), printers, scanners and data
storage devices such as HDDs, tape drives and arrays, and high-end consumer
electronic products such as compact disk players, cameras and camcorders. New,
rapidly growing applications for polyimide flexible circuit interconnect
assemblies include high-density interposers and other chip carrier packaging
applications.

The Company considers the following trends important in understanding the
electronic flexible circuit interconnect industry:

MINIATURIZATION, PORTABILITY AND COMPLEXITY OF ELECTRONIC PRODUCTS. Electronics
OEMs continue to design and introduce more compact and portable high-performance
products with greater functionality. The complexity of these new products
requires smaller size, lighter weight, greater circuit and component density,
better thermal dissipation properties, higher frequencies and increased
reliability as compared to conventional rigid board assemblies. These
requirements necessitate greater sophistication in flexible circuit interconnect
manufacturing and process technologies. The trend toward increasingly
sophisticated products also requires greater engineering expertise and
investment in manufacturing and process technology for suppliers to produce
high-quality electronic interconnect products on time, in volume and at
acceptable cost.

SHORTER PRODUCT LIFE CYCLES AND TIME TO MARKET. Rapid advances in technology
have significantly shortened the life cycle of complex electronic products and
placed increased pressure on OEMs to quickly develop and introduce new products.
These time-to-market challenges have in turn increased OEMs' emphasis on the
development, design engineering, prototype development and ramp-to-volume
capabilities of their suppliers. In addition, the importance of being first to
market with new products has heightened the emphasis on shortening supply
channels, reducing the number of suppliers and finding turnkey sourcing
capabilities that are supported by technologically advanced manufacturing
infrastructure.

GLOBALIZATION AND REDUCTION OF MANUFACTURING COSTS. At the same time that
shorter product life cycles increase time-to-market pressures, users continue to
demand increased electronic performance at lower prices. Notable product
examples of this trend are notebook computers, desktop computers, peripherals,
portable communications and consumer electronics. Leading OEMs who often
manufacture products in multiple geographic regions are relying more on
suppliers with global sourcing capabilities which can help to shorten the OEMs'
supply chain and provide regionally competitive pricing. As part of global
sourcing, OEMs increasingly require their suppliers to establish local
infrastructure to provide proximity to engineering, manufacturing and sales
support.

OUTSOURCING. To avoid delays in new product introductions, reduce manufacturing
costs and avoid logistical complexities, OEMs are increasingly turning to fewer
suppliers which are capable of producing electronic interconnect products from
development, design, quick-turn prototype and pre-production through volume
production and assembly. Many OEMs have accelerated this process by outsourcing
their captive component, subsystem and even system manufacturing to focus on
their core competencies. The accelerated time-to-market and time-to-volume needs
of OEMs have resulted in increased collaboration with qualified suppliers
capable of providing a broad and integrated offering. To meet their rapidly
changing electronic interconnect requirements, many OEMs have moved to limit
their vendor base to a smaller number of technically qualified, strategically
located suppliers capable of providing both quick-turn prototype and
pre-production quantities as well as cost-competitive volume production
quantities.

PROLIFERATION OF ELECTRONICS AND CREATION OF NEW MARKETS. The markets for
electronic products are growing as a result of technological change, increasing
demands for a wider variety of electronic product features and more powerful and
less expensive electronic components. Due to this growth, new markets have
emerged in computing, data communications, telecommunications and multimedia.
Moreover, existing markets such as computer networking and peripherals, digital
and mobile communications, video-on-demand, the Internet, instrumentation and
industrial controls have significantly expanded product applications.

CURRENT PRODUCT APPLICATIONS
The Company provides flexible circuit interconnect products to a diverse group
of markets. Historically, the HDD market has represented the largest component
of the Company's sales at 59%, 74% and 85% of total sales for 2000, 1999 and
1998. Through the ADFlex acquisition and new market expansion efforts, the
Company is continuing its efforts to reduce the impact of cyclicality of the HDD
industry on its business. However, net sales attributable to this market are
expected to continue to represent a large component of total sales for the
foreseeable future. Accordingly, the occurrence of significant slowdowns or
changes in this industry has had and may continue to have a material adverse
effect on the Company's operating results.

Current applications addressed by the Company include:


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HARD DISK DRIVES. The HDD market uses flexible circuits as the interconnect
between the read/write head and disk drive electronics. In HDD applications,
circuits need to mechanically flex hundreds of millions of times through the
life of the drive. These HDD applications include the Company's head
interconnect flex ("HIF") which provides the electrical interconnect from the
disk drive head to the back end electronics (actuator flex) of the disk drive.
The HIF is bonded to a disk drive suspension by the Company's customers. The
Flex Suspension Assembly ("FSA") is a HIF that is bonded to a suspension for
customers desiring a more complete solution. The Bridge Flex ("BFC") product
completes the connection from the suspension to the actuator flex for competing
disk drive head interconnect solutions that terminate at the back end of the
suspension. Prior to the use of flexible circuits, these disk drive
interconnects were provided by lead wire assemblies which the Company produced.
The Company also produces the actuator flex which provides the back end
electronic interconnect for the disk drive. Mounting an unpackaged die directly
onto the flexible circuit substrate, or flip chip, is becoming the predominant
interconnect technology for these applications.

NETWORK SYSTEMS. Large individual drive storage systems are being replaced by
arrays of less expensive disk drives or tape drives. The growth of personal
computer networks has generated a growth in small arrays for local area network
storage. In addition to the flexible circuit interconnects inside each of the
individual drives, controlled impedance flex interconnects are used to connect
the back of the drives to standard interface boards.

TELECOMMUNICATIONS. The use of polyimide flexible circuits in portable
communications devices is growing as the space, weight and functionality
challenges are becoming more difficult. In some cellular telephones, flexible
circuits replace rigid PCBs, connectors and cables and can thereby reduce space,
weight and cost.

CONSUMER. CD/DVD-ROMS are growing in consumer applications where higher capacity
and quicker access time, compared to tape drives, are needed. These devices use
flexible circuits as the interconnect between the read/write head and CD/DVD-ROM
drive electronics.

COMPUTER AND OTHER. Early applications for flexible circuits in notebooks were
mainly as interconnects from the motherboard to the LCD and as shielded jumpers.
More recently, systems have used as many as ten flexible circuit interconnects
per notebook, including PCMCIA connector/flex jumpers, LED/speaker flexible
circuit assemblies, track ball/mouse button flexible circuit assemblies and
various other shielded jumpers. A growing number of flexible circuit substrates
are being used in semiconductor packaging applications and as interposers for
high-density interconnect applications.

SALES AND SUPPORT
The Company markets its products directly to a number of industries requiring
electronic interconnects through the use of an internal sales staff.
Historically, the Company has sold a substantial portion of its flexible circuit
interconnects to a limited number of customers. Innovex has benefited from early
entry as a supplier to the disk drive industry and has been able to leverage
relationships established through its lead wire assembly interconnects to the
next generation integrated flexible circuit interconnects. This, coupled with
the Company's reputation for high standards of quality and innovative
manufacturing processes, has established Innovex as a predominant supplier of
interconnects for the industry. The Company has established sales with virtually
every manufacturer of disk drive heads in the world and continues to work
closely with virtually all of the world-wide disk drive head manufacturers on
new generations of disk drive products. The Company's principal customers, each
accounting for over 10 percent of the Company's consolidated net sales in at
least one of the last three years are Read-Rite, SAE/TDK, Seagate and Yamaha.
See Note J of Notes to Consolidated Financial Statements for additional
information.

Because of the Company's focus on leading edge imaging technology, its customers
include a number of the leading technology companies in the world including
Acer, Alps, Compaq, Dell, Digital Equipment, General Electric, Hewlett Packard,
IBM, Iomega, Littelfuse, Lucent, Maxtor, Medtronic, Motorola, Nokia, Philips,
Qualcomm, Quantum, ReadRite, SAE Magnetics, Samsung, Seagate, Staktek, Storage
Tek, Xerox and other leading electronic OEMs.

Even though the Company's customer mix will change from period to period in the
future, the Company expects that sales to relatively few customers will continue
to account for a high percentage of its net sales in the foreseeable future. The
loss of a significant customer or a substantial reduction in orders by any
significant customer, including reductions due to market, economic or
competitive conditions in the computer, computer peripheral, communications and
high-end consumer markets has had and may continue to have a material adverse
effect on the Company's business, financial condition, results of operations and
cash flows.

RESEARCH AND DEVELOPMENT
The Company continually engages in research, development and engineering
activities. The Company's goals are to utilize these activities to improve and
enhance existing products and to develop new products in order to expand its
market share. During fiscal years 2000, 1999 and 1998, the Company spent
approximately $3,472,000, $2,878,000 and $2,356,000 on research and development.
The Company's research and development effort is concentrated on improving and
increasing the long run flexible circuit manufacturing


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capabilities for both adhesiveless and adhesive based flexible circuits,
developing a high-quality source of material for double-sided flexible circuit
applications and improving the attachment process for the new FSA product.

The Company expects to continue its past practice of acquiring new technology
from outside sources through the payment of cash, Company stock and royalties.

ENVIRONMENTAL CONTROLS
Flexible circuit interconnect manufacturing requires the use of chemicals. As a
result, the Company is subject to a variety of environmental laws relating to
the storage, discharge, handling, emission, generation, manufacture, use and
disposal of chemicals, solid and hazardous waste and other toxic and hazardous
materials used to manufacture the Company's products. The Company has conducted
environmental studies of its facility in Chandler, Arizona, which revealed a
limited amount of soil contamination that may require remediation. Based on
these studies, the Company believes that the costs associated with the
remediation of this situation will not have a material adverse effect on its
operations or financial condition. However, given the uncertainties associated
with environmental contamination, there can be no assurance that such costs will
not have a material adverse impact on the Company. Pursuant to the agreements
governing the 1993 ADFlex purchase of certain assets from the Rogers
acquisition, Rogers Corporation has retained all environmental liabilities
relating to the purchased assets prior to the closing date of the acquisition.
While Rogers currently has sufficient assets to fulfill its obligations under
the acquisition agreements, if environmental liabilities requiring remediation
are discovered and the Company were unable to enforce the acquisition agreement
against Rogers, the Company could become subject to costs and damages relating
to such environmental liabilities. Any such costs and damages imposed on the
Company could materially adversely affect the Company.

In mid 1995, ADFlex acquired a manufacturing facility located in Agua Prieta,
Mexico. In connection with this acquisition, ADFlex conducted an environmental
study of the facility that indicated there was contamination by hazardous
materials in the soil and groundwater. Pursuant to the purchase agreement, the
sellers submitted a remediation plan to the appropriate Mexican authorities
which was approved in May 1997. Subsequent remediation was completed in December
1997. The seller is awaiting acknowledgment that the remediation plan has been
approved and no further action is required by the Mexican authorities. The
seller's obligation for the cost of remediation is limited to $2.5 million. A
total of $1.0 million originally was held in escrow pending the seller's
performance of its environmental obligations under the agreement. One third of
the escrow balance was used to conduct the remediation and two thirds has been
released to the seller.

The Company believes it has been operating its facilities in substantial
compliance in all material respects with existing environmental laws and
regulations. However, the Company cannot predict the nature, scope or effect of
legislation or regulatory requirements that could be imposed or how existing or
future laws or regulations will be administered or interpreted with respect to
products or activities to which they have not previously been applied. For this
reason, the Company implemented procedures geared toward minimizing the negative
impacts and reducing potential financial risks arising from environmental
issues. Compliance with more stringent laws or regulations, or more vigorous
enforcement policies of regulatory agencies could require substantial
expenditures by the Company and could adversely affect the results of operations
of the Company. The Company does not anticipate any material amount of
environmental-related capital expenditures in fiscal 2001.

BACKLOG
The backlog for the Company's continuing operations was $19.1 million, $36.6
million and $15.2 million at September 30, 2000, 1999 and 1998. The increase in
the 1999 backlog is due to the ADFlex acquisition. The Company's backlog
fluctuates based on the timing of the receipt of orders from customers. Backlog
is defined by the Company as firm orders that are scheduled to be delivered
within 12 months from the date of the order. While the Company currently
believes substantially all of its September 30, 2000 backlog will be delivered
within 12 months, customers may determine not to release orders into production,
may extend requested delivery dates or cancel orders. In such cases, the Company
may not realize the revenue indicated by the backlog.

COMPETITION
The flexible circuit interconnect market is differentiated by customers, markets
and geography with each niche having its own combination of complex packaging
and interconnection requirements. The Company believes it competes principally
on the basis of design capability, price, quality, flexibility and technological
advancements in underlying applications. During periods of economic slowdown in
the electronics industry and other periods when excess capacity exists,
electronic OEMs become more price sensitive. The Company believes that once a
customer has selected a particular vendor to design and manufacture a flexible
circuit interconnect, the customer generally relies upon that vendor's design
for the life of that specific application and, to the extent possible,
subsequent generations of similar applications. Accordingly, it is difficult to
achieve significant sales to a particular customer with respect to any
application once another vendor has been selected to design and manufacture the
flexible circuit interconnect used in that application. While this market
paradigm may provide a barrier to the Company's competitors in the markets
served by the Company, it also may present an obstacle to the Company's entry
into other markets.


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The flexible circuit interconnect market is highly competitive. The Company
experiences competition world-wide from a number of leading foreign and domestic
providers such as Minnesota Mining and Manufacturing ("3M") and Sumitomo for
high-end applications, and Nippon Mektron ("NOK"), Fujikura Ltd. ("Fujikura"),
Nitto Denko, Multi-Fineline Electronix, Inc. ("M-Flex"), Sheldahl Inc.
("Sheldahl") and Parlex Corporation ("Parlex") for mid-range applications. 3M,
Sumitomo, NOK and Fujikura are substantially larger than the Company with
greater financial and other resources. M-Flex, Sheldahl and Parlex are US-based
flexible circuit manufacturers that have lower sales of polyimide flexible
circuits than the Company and have historically targeted suppliers of computers,
communication and automotive services and the military. Expansion of the
Company's existing products or services could expose the Company to new
competition. Moreover, new developments in the electronics industry could render
existing technology obsolete or less competitive and could potentially introduce
new competition into the market. There can be no assurance that the Company's
competitors will not develop enhancements to, or future generations of,
competitive products or services that will offer superior price or performance
features to those of the Company or that new competitors will not enter the
Company's markets. Finally, as many of the Company's competitors are based in
foreign countries, they have cost structures and prices based on foreign
currencies. Accordingly, currency fluctuations could cause the Company's
dollar-priced products to be less competitive than its competitors' products
priced in other currencies.

The Company also competes in assembly matters with leading flexible circuit
assembly providers such as Smartflex Systems, Inc. ("Smartflex") and Pemstar.
The Company believes that competition in assembly is primarily driven by
availability of assembly technology, price and cycle time. The Company believes
it competes favorably with these competitors because it offers its customers a
complete flexible circuit interconnect solution including design, fabrication,
assembly and testing.

The Company's competitors can be expected to continue to improve the design and
performance of their products and to introduce new products with competitive
price/performance characteristics. Competitive pressures often necessitate price
reductions that adversely affect operating results. The Company will be required
to make a continued high level of investment in product development and
research, sales and marketing, and ongoing customer service and support to
remain competitive. There can be no assurance that existing or future
competitors will not be able to duplicate the Company's strategies or that
competitive pressures faced by the Company will not have a material adverse
effect on the Company.

EMPLOYEES
As of September 30, 2000, the Company had a total of 5,251 employees. Of these
employees, 120 were based at the Company's Maple Plain, Minnesota facility; 312
were based in Chandler, Arizona; 387 were based in Litchfield, Minnesota; 15
were based in Agua Prieta, Mexico and 4,417 were based in Thailand.

The Company has transferred operations from its Agua Prieta, Mexico facility to
Lamphun Thailand. Those Mexican employees impacted by this transfer were paid
severance in accordance with Mexican labor laws.

The Company's future operating results depend in part upon its ability to
attract and retain other qualified management, technical, manufacturing, sales
and support personnel for its operations. Competition for such personnel is
intense and there can be no assurance that the Company will be successful in
attracting or retaining such personnel. The failure to attract or retain such
persons could materially adversely affect the Company.

INTELLECTUAL PROPERTY
The Company believes that, due to its customers' demands for rapid technological
advances and the resulting limited product life cycles, the success of its
business depends more on the technical and engineering expertise, creativity and
marketing, and service abilities of its employees than on patents, trademarks
and copyrights. Nevertheless, the Company owns patents and has a policy of
seeking patents when appropriate on inventions concerning new products and
improvements as part of its ongoing research, development and manufacturing
activities. There can be no assurance that any patents issued to the Company
will provide a competitive advantage or will not be challenged by third parties,
or that the patents of others will not have an adverse effect on the Company's
ability to do business. Furthermore, there can be no assurance that others will
not independently develop similar products, duplicate the Company's products or
design around the patents issued to the Company. In addition, there can be no
assurance that foreign intellectual property laws or the Company's agreements
will protect the Company's intellectual property rights in any foreign country.
Any failure to protect the Company's intellectual property rights could have a
material adverse effect upon the Company.

SUPPLIERS
The Company purchases raw circuit materials, process chemicals and various
components from multiple outside sources. For components, the Company typically
makes short-term purchasing commitments to key suppliers for specific customer
programs. These commitments are usually made for three to twelve month periods.
These suppliers commit to providing cooperative engineering, as required, and in
some cases maintain a local inventory to provide shorter lead times and reduced
inventory levels for the Company. In most cases, suppliers are approved, and are
often dictated by the Company's customers. For process chemicals, the Company
relies on a limited number of key suppliers. Alternate chemical products are
available from other sources, but process chemical changes would often require
requalification of the


                                       7
<PAGE>


processes, which could take weeks or months to complete. The Company has
attempted to mitigate these risks by identifying stable companies with leading
technology and delivery positions.

The Company currently purchases a number of its components, process chemicals
and other materials from single sources. In the United States, these products
are available only from a limited number of suppliers. There can be no assurance
that these sources will continue to supply the Company with the materials needed
at competitive prices.

While viable alternate suppliers exist, because of the Company's limited
inventory of raw materials, tight manufacturing cycles and the significant
amount of time required to qualify new suppliers, single sourcing is expected to
continue. Consequently, any unanticipated interruption of material supplies or
components would have a short-term material adverse effect on the Company.

TECHNOLOGY
DESIGN TECHNOLOGY. The flexible circuit interconnects manufactured by the
Company are designed specifically for each application, requiring significant
joint design activities between the Company and the customer at the start of a
project. The Company has developed design methodologies that solve difficult
interconnection problems and save the customer time and money. The Company also
designs and produces, in volume, flexible circuits that range from high-density,
single-sided circuits to more complex double-sided and multi-layer circuits. The
Company is continually investing in and improving its computer-based design
tools to more quickly design new flexible circuit interconnects, to enhance
cooperative design and communication with its customers and to more closely link
designs to the manufacturing process. The Company is recognized as a technology
leader in fine-line, single-sided flexible circuit technology and flexible
circuit assembly technology, including advanced chip-on-flex, flip-chip-on-flex
and high-density polyimide assembly technologies.

CIRCUIT FABRICATION TECHNOLOGY. The Company has extensive experience in
fine-line polyimide flex and has pioneered manufacturing processes that deliver
high unit volumes at cost-effective yields. At the core of the process is
roll-to-roll subtractive fine-line circuit processing. The starting materials
are flexible laminates composed of a thin dielectric film that is either
adhesive-bonded to treated copper foil or metalized without the use of
adhesives. Very accurate images (down to 0.001") are produced in volume in
photoresist. Circuit conductors are then formed by chemically etching the
underlying copper foil. Coverfilm materials are adhered to the circuitry to
provide an insulative coating and to expose contact pads for surface
metalization. The exposed surfaces are then coated with solder for surface mount
or bondable gold for chip-on-flex applications. Laser processing is then used to
create various openings to drill vias and cut contoured peripheries in substrate
materials.

The Company's key flexible circuit fabrication technologies include:

         FINE FEATURE ROLL-TO-ROLL IMAGING AND ETCHING. Allows the fabrication
         of circuits with very fine line widths and spaces. This is critical to
         meeting complex space constrained interconnection needs. Processing
         wide web (up to 24 inches) in a continuous roll-to-roll format (as
         opposed to discrete panels) allows fabrication of high circuit volumes
         with improved material utilization resulting in lower cost.

         LASER PROCESSING. Laser technology is used to produce low cost, very
         fine openings, small vias and contoured shapes that solve density
         problems while avoiding more expensive traditional alternatives. Also,
         using a laser to cut the periphery of parts allows prototypes and low
         volume production parts to be built faster and without the cost of
         blanking die.

         BONDABLE GOLD PLATING. Prepares flexible circuits for chip-on-flex
         bonding, a process which saves space and improves electrical
         performance (access time) by wire bonding an IC die directly to the
         flexible circuit.

         COVERFILM, LAY-UP AND LAMINATION. A process where coverfilm materials
         are adhered to the circuitry to provide an insulative coating and to
         expose contact pads for surface metalization. This process allows
         accurate positioning of solder plated pads to support fine pitch
         surface mount assembly to the finished circuits.

         ASSEMBLY AND TEST TECHNOLOGY. The Company applies advanced assembly and
         test technology to provide flexible circuit interconnect assemblies to
         its customers. The Company assembles passive electrical and various
         mechanical components, including connectors, stiffeners, diodes, formed
         metal parts and other devices to its flexible circuits using primarily
         manual processes in its plants in Thailand. The Company also performs
         advanced direct die attach and assembly of integrated circuit devices
         as well as the functional testing of these flexible circuit assemblies.
         Assembling these components directly onto the flexible circuit
         increases performance and reduces space, weight and cost.

MANUFACTURING
The Company has developed a manufacturing process that combines the use of
technology with the deployment of human resources in a geographic and
organizational manner that allows the Company to compete on a pure cost basis,
if necessary, with suppliers of similar


                                       8
<PAGE>


products throughout the world. Quality systems are in place that are certified
to standards set by demanding customers in the electronics industry. The
Chandler facility is ISO 9001 certified and the Lamphun Thailand operation has
received ISO 9002 certification.

The Company believes it enjoys a cost advantage based on a manufacturing process
designed to optimize the utilization of automation, labor and capital, and a
manufacturing process and technology with better yield, material utilization and
throughput relative to its competitors. The Company also believes that
integrating assembly technology with manufacturing technology and high-volume
production capabilities will over time provide improvements in its production
costs through higher product yields, faster production ramps, reduced
inventories, shortened production cycle times, improved account control and
increased leverage over expenses. In addition, the Company has expanded its
Thailand manufacturing operation. The Company anticipates that the expanded
Thailand facility will enable it to attain significant cost reductions that are
crucial to mitigating competitive price pressures in Asia and help sustain the
Company's implementation of a complete flexible circuit interconnect solution
including design, fabrication, assembly and testing.

FOREIGN SALES AND OPERATIONS
The Company has finishing, assembly and inspection facilities located in Korat
and Lamphun, Thailand. While the Company believes it has established good
relationships with its local labor forces and the local governments, the spread
of the manufacturing process over multiple countries subjects the Company to
risks inherent in international operations. Those risks include currency
fluctuations, inflationary pressures, unexpected changes in regulatory
requirements, tariffs and barriers, potentially limited intellectual property
protection, potential cross border shipment delays, changes in political
climate, difficulties in coordinating and managing foreign operations, foreign
labor issues, increases in employee turnover and potentially adverse tax
consequences. Any of the foregoing could have a material adverse effect on the
Company.

While Innovex transacts business predominantly in U.S. Dollars and the majority
of its net sales are collected in U.S. Dollars, an increasing portion of its
sales and expenses are denominated in foreign currencies. Changes in the
relation of foreign currencies to the U.S. Dollar will affect the Company's cost
of goods sold and operating margins and could result in exchange losses. To
reduce the impact of certain foreign currency fluctuations, the Company enters
into short-term forward foreign currency exchange contracts (hedges) in the
regular course of business. The forward exchange contracts generally require the
Company to exchange foreign currencies for U.S. Dollars at maturity, at rates
agreed to at inception of the contracts. The gains or losses on hedges of
transaction and remeasurement exposure are included in income in the period in
which the exchange rates change. The gains and losses on unhedged foreign
currency transactions are included in income as incurred. No assurance can be
given that the Company's hedging strategies will prevent future currency
fluctuations from adversely affecting the Company.

Although a large portion of the sales and expenses for the Thailand operation
are denominated in U.S. Dollars, an increasing portion of the sales are
denominated in Thai Baht due to the purchase of the Company's Thailand
subcontractor in October 1999. The Thai Baht experienced significant
fluctuations in relation to the U.S. Dollar during portions of 1999 and 2000.
The fluctuations did not have a significant impact on the Company's results of
operations for those years. However, there can be no assurance that future
currency fluctuations will not have a material adverse effect on the Company.


                                       9
<PAGE>


ITEM 2. PROPERTIES

In total, at September 30, 2000, the Company leased or owned approximately
711,000 square feet of manufacturing and other space. The Company's significant
facilities are as follows:

<TABLE>
<CAPTION>
FUNCTIONS                          LOCATION (NUMBER OF FACILITIES)      SQUARE FEET     OWNED/LEASED      EXPIRATION
---------                          -------------------------------      -----------     -------------     ----------
<S>                                <C>                                  <C>             <C>               <C>
Executive Offices and              Maple Plain, Minnesota (one)          80,000         Owned             N/A
Research and Development

Sales and Support; Research and    Chandler, Arizona (one)              150,000         Leased            June 2003
Development: Circuit
Fabrication

Held for disposition               Agua Prieta, Mexico (one)            161,000         Owned             N/A

Circuit inspection and             Korat Thailand (one)                  30,000         Owned             N/A
finishing

Circuit Finishing and              Lamphun Thailand (two)                15,000         Owned             N/A
Assembly; Sales and Support                                             140,000         Owned             N/A

Circuit Fabrication                Litchfield, Minnesota (five)          55,000         Owned             N/A
                                                                         15,000         Owned             N/A
                                                                         10,000         Owned             N/A
                                                                         51,000         Owned             N/A
                                                                          4,000         Owned             N/A
</TABLE>

The Company constructed the building in Maple Plain, Minnesota to be used for
the manufacturing of materials for use in double-sided flexible circuit
production, research and development and corporate offices. The Company obtained
the Arizona, Mexico and Thailand facilities during fiscal 1999 as part of the
ADFlex acquisition. The Lamphun Thailand facility was completed in February 1999
and will be used for circuit finishing and assembly. In November 1999, the
Company made the determination to close the Mexican facility and combine its
operations with those in Thailand to reduce excess manufacturing capacity. The
Korat Thailand facility was obtained in October 1999 with the acquisition of the
Company's Thailand subcontractor. The Company believes that the facilities in
Arizona, Minnesota and Thailand are adequate to meet its current requirements,
and that suitable additional space or substitute space is readily available as
needed.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor any of its subsidiaries is a party to, and none of its
property is the subject of, any material pending legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Registrant did not submit any matter to a vote of its security holders
during the fourth quarter of the fiscal year covered by this Report.

ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT

Name                         Age    Position
----                         ---    --------

Thomas W. Haley              64     Chairman, and Director of the Company

William P. Murnane           38     President and Chief Executive Officer

Allan J. Chan                50     Senior Vice President, Sales and Marketing

Brian R. Dahmes              40     Vice President, Managing Director, Innovex
                                    (Thailand)

Douglas W. Keller            42     Vice President, Finance


                                10
<PAGE>


Srinivas Kuchipudi           32     Vice President, Operations

Timothy S. McIntee           42     Senior Vice President, Corporate

Venkatraman B. Rao, Ph.D.    48     Vice President, Research & Development

Mr. Haley served as President of the Company from 1972 to 1988 and Chief
Executive Officer from 1988 through 1999. He has been a Director and Chairman of
the Company since its inception in 1972.

Mr. Murnane was promoted to President and Chief Operating Officer in July 1998
and to Chief Executive Officer in January 2000. Mr. Murnane joined the Company
in July 1995 as Vice President. From June 1993 to June 1995, Mr. Murnane was
Chief Operating Officer of Boutwell, Owens & Co., a private manufacturer of
packaging, in Fitchburg, Massachusetts. From June 1992 to June 1993, Mr. Murnane
was Director of Operations for Uniform Printing & Supply, Inc. in Acton,
Massachusetts. Prior to that, he held various operating and corporate planning
positions during a ten-year career at United Parcel Service.

Mr. Chan joined the Company in June 1988 as Director of Sales and Marketing for
the Precision Products Division. In October 1990 Mr. Chan was promoted to Vice
President of Sales and Marketing of the Precision Products Division. In 1991 his
responsibilities were expanded to include manufacturing. In May 1995, he was
promoted to Vice President and General Manager of Precision Products Division.
In July of 1998, he was promoted to Senior Vice President , Sales and Marketing.
Prior to joining Innovex, Mr. Chan was the Director of Sales and Marketing for
Braemar Computer Corporation a division of Carlysle Corporation.

Mr. Dahmes joined the Company in July 1997 as Plant Manager. Mr. Dahmes was
promoted to Director of Manufacturing in July 1998 and to Vice President,
Quality in March of 1999. In November 1999, he accepted his most recent
promotion to Vice President, Managing Director Innovex (Thailand). From 1992 to
1995, Mr. Dahmes served as Process Engineering Manager for Sheldahl
Interconnect, and from 1995 to 1997 he was an Engineering Manager with Sheldahl
Microproducts.

Mr. Keller joined the Company in January 1990 as Corporate Controller. In May
1992, Mr. Keller was made an officer of the corporation and in October 1996 he
was promoted to Vice President, Finance. From July 1988 to January 1990, Mr.
Keller was Manager of Financial Accounting and Tax for UFE, Inc., a manufacturer
of injection molded plastic components. From 1983 to 1988, Mr. Keller was a
Senior Auditor for the Pillsbury Company. From 1980 to 1983, he was a Senior
Accountant with Deloitte Haskins & Sells, a CPA firm.

Mr. Kuchipudi joined the Company in September 1999 as Vice President,
Operations. From July 1996 to August 1999, Mr. Kuchipudi was a management
consultant for Pittiglio Rabin Todd & McGrath. Prior to that, he held various
engineering and marketing positions during a five-year career at Motorola, Inc.

Mr. McIntee joined the Company in August 1997 as Vice President, Corporate
Development and was promoted to Senior Vice President, Corporate in July 1998.
From 1984 to 1997, Mr. McIntee was an attorney for the law firm of Lindquist &
Vennum in the Mergers & Acquisitions Division. Prior to that, he was a CPA for
several years.

Dr. Rao joined the company in December 1998 as the Vice President, Research and
Development. Prior to that he held various senior management R&D positions at
Silicon Graphics Inc., Cray Research Inc., Supercomputer Systems Inc. and
Tektronix. Dr. Rao successfully led teams for the development of advanced
high-density multi-chip modules, integrated circuits, multilayer printed circuit
boards, flex circuits and flip chip assembly for high end super computer
applications.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

COMMON STOCK INFORMATION
The Company's common stock is traded in the over-the-counter market under the
symbol "INVX." The table below sets forth the high and low closing sale prices
as reported by NASDAQ. As of November 24, 2000, the Company had 655 shareholders
of record. The Company has not paid a dividend since November 1999. The
Company's intention is to continue this policy.


                                       11
<PAGE>


<TABLE>
<CAPTION>
Price Range of Common Stock                                  2000                      1999
                                                   ---------------------------------------------------
                                                     High          Low         High           Low
------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>        <C>             <C>
First Quarter                                      $11-1/16       $7-1/2     $17-15/32       $9-5/16
Second Quarter                                      12-1/4         8-3/8      19-1/2         12-3/4
Third Quarter                                       10-3/8         7-1/8      14-3/8         12-5/8
Fourth Quarter                                      15-1/4         9-1/2      15-3/8          8-9/16
</TABLE>

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data has been derived from the
consolidated financial statements of the Company for each of the years in the
five-year period ended September 30, 2000. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company and related notes thereto included elsewhere in this report.

<TABLE>
<CAPTION>
Years Ended September 30,                         2000            1999            1998            1997           1996
--------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>              <C>            <C>             <C>
Net sales                                     $164,461,510    $103,197,766     $96,277,930    $142,003,743    $69,570,222
Net income (loss)                              (11,054,410)      6,558,534      15,911,079      35,093,603     13,121,006
Net income (loss) per share:
  Basic                                             ($0.75)          $0.44           $1.08           $2.43          $0.93
  Diluted                                           ($0.75)          $0.44           $1.05           $2.31          $0.91
Cash dividends per share                             $0.04          $0.155          $0.135          $0.113         $0.088
Total assets                                   167,679,892     178,806,124     109,651,849      97,274,754     58,244,346
Long-term debt, less current maturities         21,003,284      26,375,546         755,024         950,733      1,063,253
Stockholders' equity                            96,396,047     107,134,199     102,418,060      86,817,374     48,400,116
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

EARNINGS SUMMARY
The Company reported a net loss of ($11,054,000), or ($0.75) basic and diluted
net income per share for the fiscal year ended September 30, 2000. This compares
to net income of $6,559,000, $0.44 basic and diluted net income per share in
fiscal 1999 and $15,911,000, $1.08 basic and $1.05 diluted net income per share
in 1998. Fiscal 2000 results decreased as compared to fiscal 1999 primarily due
to charges to restructure the Company's manufacturing operations by eliminating
excess capacity, moving operations from Mexico to Thailand and closing the
Mexican facility. The decrease is also due to operating losses generated by the
acquired ADFlex operation and increased interest expense as a result of the
ADFlex acquisition. Revenue related to the acquired ADFlex operation decreased
throughout fiscal 2000 as a result of pre-acquisition customer service and
quality issues and the operations relatively high cost structure. During fiscal
2000, Innovex took the steps necessary to turn the operation around. The higher
cost Mexican facility was closed with operations being transferred to the
expanded lower cost Lamphun Thailand facility and the manufacturing, customer
service and quality areas were strengthened. At the end of fiscal 2000, the
Company began to see a resurgence of orders related to the acquired operation
and as a result, expects improving revenue and operating results from the
acquired ADFlex operation in fiscal 2001.

Fiscal 1999 results decreased in comparison to 1998 due to the increase in
flexible circuit sales to the disk drive industry not offsetting the phase out
of lead wire assembly revenue. This was due in part to continued disk drive
industry softness. This softness appears to be the result of an over supply of
disk drives and due to a reduction in the number of disk drives kept in
inventory by computer manufacturers that have adopted a build-to-order business
model. Also contributing to the sales decrease was a reduction in the average
number of heads per disk drive. This reduction is the result of an increasing
number of low-cost disk drives being sold and as a result of the use of magneto
resistive (MR) and Giant Magneto Resistive (GMR) disk drive heads which increase
the storage capacity per disk drive platter and reduce the number of heads
required to provide the same disk drive capacity.

The decrease in gross margin percent in fiscal 2000 was primarily due to the
inclusion of lower margin revenue related to the acquired ADFlex operation. The
acquisition related revenue generates a lower gross margin percent than
Innovex's high-end flexible circuit revenue due to the higher material content
of the assembly portion of the business and lower level of technical tolerances
required. Gross margins for the acquired ADFlex operation are also lower due the
higher level of fixed costs related to the operation. The drop in gross margin
percent during 1999 as compared to 1998 was due to several factors, the
inclusion of 8 weeks of lower margin ADFlex related sales, reduced yields and
costs related to an aggressive new product ramp up in production concurrent with
new flexible circuit capacity


                                       12
<PAGE>


installation and due to lower shipments of lead wire assemblies reducing the
leverage of the fixed overhead costs related to their production.

Operating expenses were 14.5% of revenue in fiscal 2000 as compared to 13.9% and
12.0% of revenue in fiscal years 1999 and 1998, respectively. The increase in
fiscal 2000 operating expenses is a result of amortization of intangibles
related to the ADFlex acquisition and the acquisition of the Company's Thailand
subcontractor and higher engineering expenses related to the development of a
base material manufacturing process at the Company's new Maple Plain facility.
The increase in operating expenses as a percent of sales for 1999 over 1998 is
primarily due to increases in marketing, professional and legal expenses.

RESULTS OF OPERATIONS
NET SALES. The Company's net sales of $164,462,000 for fiscal 2000 increased 59%
from fiscal 1999 net sales of $103,198,000. The increase in 2000 over 1999 was
due, in part to the increase in flexible circuit revenue from the disk drive
industry. In addition, a large portion of the increase was due to revenue
generated from the telecommunication, network system, consumer and other
industries related to the August 1999 acquisition of ADFlex. These increases
offset a reduction in revenue generated from lead wire interconnects as the disk
drive industry transitioned to integrated interconnects including the Company's
Head Interconnect Flex (HIF) and Flex Suspension Assembly (FSA). Less than 1% of
revenue for fiscal 2000 was generated by lead wire assemblies as compared to 26%
for fiscal 1999.

Net sales for fiscal 1999 were $103,198,000, a 7% increase from 1998 net sales
of $96,278,000. The increase in 1999 over 1998 was primarily due to the fourth
quarter results including eight weeks of operating results related to the
acquisition of ADFlex Solutions, Inc. Excluding the acquisition related revenue,
net sales would have decreased by 14%. Fiscal 1999 revenue was impacted by the
transition of the disk drive industry from traditional lead wire interconnects
to integrated interconnects including the Company's Head Interconnect Flex
(HIF). The large increase in these flexible circuit sales to the disk drive
industry did not offset the phase out of lead wire assembly revenue. This was
due in part to continued disk drive industry softness as a result of an over
supply of disk drives and due to a reduction in the number of disk drives kept
in inventory by computer manufacturers that have adopted a build-to-order
business model. Also contributing to the sales decrease was a reduction in the
average number of heads per disk drive. This reduction is the result of an
increasing number of low-cost disk drives being sold and as a result of the use
of magneto resistive (MR) and Giant Magneto Resistive (GMR) disk drive heads
which increase the storage capacity per disk drive platter and reduce the number
of heads required to provide the same disk drive capacity.

Revenue from the disk drive industry generated 59% of fiscal 2000 revenue and is
expected to be a similar percentage during fiscal 2001. In addition, during
fiscal 2000, 15% of the revenue was generated by flexible circuits for consumer
applications, 11% from network system applications, 9% from telecommunications
applications and 6% from applications from other industries. The acquisition of
ADFlex has reduced the Company's dependence on the disk drive industry
significantly from its historical levels of 85-90% of revenue. Fiscal 2001
should benefit from continued growth in the demand for high technology flexible
circuit products including the Company's HIF and FSA. Significant progress has
been made in gaining customer acceptance of the Company's FSA product that will
be integral to increasing revenue in fiscal 2001.

Export sales accounted for 73% of the Company's revenue in fiscal 2000 as
compared to 74% for 1999 and 83% for 1998, reflecting the high level of
interconnect shipments to electronic manufacturers in Asia. A significant
portion of the remaining domestic sales are subsequently shipped internationally
by the Company's customers.

GROSS MARGIN. The Company's gross profit as a percent of sales for fiscal 2000
decreased to 15.0%, from the 26.1% reported for fiscal 1999. The decrease was
primarily due to fiscal 2000 including lower margin revenue related to the
acquired ADFlex operation. The acquisition related revenue generates a lower
gross margin percent than the high-end Innovex flexible circuit revenue due to
the higher material content of the assembly portion of the business and lower
level of technical tolerances required. Gross margins for the acquired ADFlex
operation are also lower due the level of fixed costs related to the operation.
The Company anticipates growing gross margin percents on the pre-acquisition
Innovex revenue during fiscal 2001 through improved yield performance and
increased utilization of the high volume manufacturing facility. Gross margins
on the revenue generated by the acquired operations are expected to improve as a
result of the transfer of manufacturing operations from Mexico to Thailand and
other cost saving initiatives.

The Company's gross profit margin decreased to 26.1% of sales in fiscal 1999 as
compared to 33.3% in 1998. The decrease in 1999 was partially due to the fourth
quarter results including eight weeks of operating results related to the
acquisition of ADFlex Solutions, Inc. The ADFlex revenue generates a lower gross
margin percent than the existing Innovex flexible circuit revenue due to the
higher material content of the assembly portion of the business and lower level
of technical tolerances required. Gross margins for the pre-purchase high-end
flexible circuit revenue were lower in the fourth quarter due to reduced yields
and costs related to an aggressive new product ramp up in production concurrent
with new capacity installation. In addition, the fiscal 1999 gross margin
percent decreased due to lower shipments of lead wire assemblies reducing the
leverage of the fixed overhead costs related to their production.


                                       13
<PAGE>


OPERATING EXPENSES. Selling, general and administrative expenses were 9.8% of
net sales in 2000 as compared to 9.5% in 1999 and 7.7% in 1998. The increase in
selling, general and administrative expenses in fiscal 2000 over 1999 is the
result of the amortization of intangibles related to the ADFlex and the Thailand
subcontractor acquisitions. The increase in operating expenses as a percent of
sales for 1999 as compared to 1998 is primarily due to the decrease in revenue
and an increase in marketing, professional and legal expenses. Increases in
marketing expenses were incurred to expand efforts to diversify the Company's
revenue base and increases in professional services were due to consultants
being retained to improve the manufacturing operation efficiency. Fiscal 2001
operating expenses should decrease as a percent of sales as a result of modest
increases in spending offset by the expected increase in revenue from the
Company's FSA product and other new product applications.

Engineering expense increased to 4.7% of net sales in fiscal 2000 from 4.4% in
1999 and 4.3% in 1998. The increase in operating expenses as a percent of sales
for fiscal 2000 is due to an increase in engineering expense related to the
development of base material manufacturing process in the new Maple Plain
Minnesota facility. Engineering spending remained relatively stable in fiscal
1999 as compared to 1998. The fiscal 2000 and 1999 spending was concentrated on
FSA development and the development of a process to manufacture material for use
in producing double sided, plated through-hole flexible circuits. Fiscal 2001
engineering spending is expected to concentrate on technologies related to the
material producing capability, FSA capabilities, semiconductor packaging
substrates and other high-end flexible circuit technology development.

RESTRUCTURING CHARGES. A restructuring charge of $13,785,000 was recorded during
the first quarter of fiscal 2000 related to the restructuring of the Company's
manufacturing operations. The restructuring is primarily related to moving
operations from the Company's Agua Prieta, Mexico facility to its new facility
in Lamphun, Thailand. The majority of this charge includes employee severance,
asset impairment of property and equipment and facility abandonment costs. The
restructuring is expected to significantly reduce operating costs as a result of
consolidating facilities and the lower Thailand cost structure. A change in
estimate was made in the fourth quarter to reduce employee termination benefits
by $1.5 million and increase facility abandonment charges by $1.5 million. This
was the result of higher turnover than projected and higher than expected costs
to dispose of the Mexican facility. A $184,000 reduction in estimated
restructuring charges was recorded in the third quarter primarily related to the
lead wire product line disposition.

Restructuring charges for fiscal 1999 included a $2.8 million charge related to
the discontinuation of the lead wire assembly product line and charges of $1.7
million related to the disposition of Iconovex, Innovex's software division.

INTEREST INCOME (EXPENSE). Interest income decreased to $524,000 in fiscal 2000
from $2,035,000 and $2,029,000 in 1999 and 1998, respectively. The decrease in
fiscal 2000 corresponds to the reduction in the Company's excess cash as a
result of the ADFlex acquisition and the high level of capital expenditures in
fiscal 2000. Interest expense increased to $3,193,000 in 2000, from $467,000 in
1999 and $69,000 in 1998. Interest expense increased substantially in fiscal
2000 related to the new $40 million credit facility put in place related to the
ADFlex acquisition.

OTHER INCOME (EXPENSE). Net other expense for fiscal 1999 included a $630,000
charge related to the settlement of threatened litigation by a former director
of the Company.

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES. Income (loss) before provision
for income taxes was ($15,570,000) for fiscal 2000 as compared to $9,239,000 for
1999 and $22,654,000 for 1998. As a percent of net sales, income before
provision for income taxes was (9.5%) for 2000 as compared to 9.0% and 23.4% for
1999 and 1998.

LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments decreased by $23,863,000 to $1,678,000 at
September 30, 2000. Net cash provided by operating activities decreased in 2000
to $766,000 from $26,215,000 in 1999 and $32,207,000 in 1998. The reduction in
cash and short-term investments and in net cash provided by operating activities
during fiscal 2000 was primarily due to charges to restructure the Company's
manufacturing operations, temporary increases in inventory as a result of the
move from Mexico to Thailand, operating losses generated by the acquired ADFlex
operation and increased interest expense. The Company invested approximately $24
million in capital expenditures in both fiscal 2000 and 1999. These capital
expenditures in both fiscal 2000 and 1999 include additional equipment to
increase the capacity of the automated flexible circuit production facility in
Litchfield, Minnesota and the costs to construct and equip a material
manufacturing facility. In addition, fiscal 2000 included capital expenditures
to increase the capacity of the Lamphun Thailand facility as part of the
manufacturing restructuring plan to close the Mexican facility and move the
operation to Thailand. The increase in 1998 cash and short-term investments was
primarily due to cash flows from operations. During fiscal 1998, the Company
invested approximately $13 million in capital expenditures. These expenditures
included a portion of the costs to construct and equip an automated flexible
circuit production facility. This facility was constructed to meet the expected
demand for high-volume applications including the HIF, FSA and semiconductor
packaging related products. The Company also acquired the assets and operations
of its Thailand subcontractor in October 1999 for $3,750,000.


                                       14
<PAGE>


On September 15, 1999, the Company entered into a new credit facility arranged
by Norwest Bank Minnesota N.A. which includes U.S. Bank N.A. as an additional
lender. The facility was put in place to pay off all outstanding balances
existing at the time of the ADFlex acquisition under the Credit Agreement among
ADFlex, BankBoston N.A. and Bank Boston N.A. as Agent for Lenders, as amended,
as required by the ADFlex merger agreement. The new credit facility consists of
a $15.0 million, five-year revolving line of credit and a $25.0 million,
five-year term loan with equal principal payments due each quarter commencing on
October 1, 2000 and continuing through the September 14, 2004 maturity date. At
September 30, 2000, $25 million was outstanding under the term loan and $9.7
million was outstanding under the revolving line of credit.

Working capital decreased by $24,724,000 to $6,297,000 at September 30, 2000.
The Company's current ratio was 1.1 to 1 at fiscal 2000 year-end, compared to
1.7 to 1 at the end of fiscal 1999. The decrease is primarily due to the reduced
level of cash and short term investments and the increase in current maturities
of long term debt.

Net property, plant and equipment increased by $7 million to $94,520,000 at
September 30, 2000. The increase was due to capital expenditures related to
increasing the capacity of the automated flexible circuit production facility in
Litchfield, Minnesota, capital expenditures to expand the Lamphun Thailand
facility capacity and a portion of the costs to construct and equip a new
material manufacturing facility in Maple Plain, Minnesota offset by assets
disposed of as part of the manufacturing restructuring including the closing of
the Agua Prieta Mexico facility. Intangible assets increased $2.2 million to
$7.1 million at September 30, 2000 primarily as a result of the acquisition of
the Company's Thailand subcontractor.

Long-term debt, net of current maturities, decreased by $5 million as a portion
of the credit facility entered into in 1999 as a result of the ADFlex
acquisition is payable in fiscal 2001 and was transferred to current maturities
of long-term debt. The ratio of long-term debt to stockholders' equity was .218
at September 30, 2000 compared to .246 at the end of fiscal 1999.

Management has entered into negotiations for obtaining additional credit
facilities that would be secured by the receivables, inventory and assets held
by the Company in Thailand. Management believes the establishment of a credit
facility secured by Thailand assets, existing credit facilities, cash and
investments and cash generated from operations will provide an adequate source
of funds to support projected working capital and capital expenditures in fiscal
2001.

FORWARD-LOOKING INFORMATION
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, elsewhere in the Annual Report, in the
Company's Form 10-K and in future filings by the Company with the SEC, except
for the historical information contained herein and therein, are
"forward-looking statements" that involve risks and uncertainties. These risks
and uncertainties include the timely availability and acceptance of new products
including the FSA and semiconductor packaging substrates, the impact of
competitive products and pricing, the development and implementation of a
materials manufacturing process, the transfer of Mexican operations to Thailand
and the associated rapid expansion of the Thailand manufacturing capabilities,
interruptions in the operations the Company's single source suppliers, changes
in manufacturing efficiencies and other risks detailed from time to time in the
Company's reports filed with the Securities and Exchange Commission. In
addition, a significant portion of the Company's revenue is generated from the
disk drive, consumer electronics, network system and telecommunication
industries and any changes in the structure, technology or outlook of these
industries could have a significant impact on the Company's operations. The
Company disclaims any obligation subsequently to revise any forward-looking
statements to reflect subsequent events or circumstances or the occurrence of
unanticipated events.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's earnings and cash flows are subject to fluctuations due to changes
in foreign currency exchange rates. While the Company transacts business
predominately in U.S. Dollars and a majority of its net sales are collected in
U.S. Dollars, a material portion of its sales and expenses are denominated in
foreign currencies. Changes in the relation of foreign currencies to the U.S.
Dollar will affect the Company's cost of goods sold and operating margins and
could result in exchange gains or losses. To reduce the impact of certain
foreign currency fluctuations, the Company enters into short-term forward
foreign currency exchange contracts (hedges) in the regular course of business
to manage its risk exposure, not as speculative instruments. Typically, these
contracts have maturities of 2 months or less. The forward exchange contracts
generally require the Company to exchange foreign currencies for U.S. Dollars at
maturity, at rates agreed to at inception of the contracts. The gains or losses
on hedges of transaction exposure are included in income in the period in which
the exchange rates change. The gains and losses on unhedged foreign currency
transactions are included in income.

The Company periodically reviews the outlook for expected currency exchange rate
movements as well as the policy on desired future foreign currency cash flow
positions (long, short, balanced) for those currencies in which the Company has
significant activity. Expected future cash flow positions and strategies are
continuously monitored. At September 30, 2000, the Company had three open
forward exchange contracts to sell Thai Baht for a total of 280,000,000 Thai
Baht. No assurance can be given that the Company's hedging


                                       15
<PAGE>


strategies will prevent future currency fluctuations from adversely affecting
the Company's business, financial condition, results of operations and cash
flows.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL DATA

                                                                           Page
Report of Independent Certified Public Accountants                         18
Consolidated Balance Sheets at September 30, 2000 and 1999                 19
Consolidated Statements of Operations for each of the three years in
 the period ended September 30, 2000                                       20
Consolidated Statements of Stockholders' Equity for each of the three
 years in the period ended September 30, 2000                              21
Consolidated Statements of Cash Flows for each of the three years in
 the period ended September 30, 2000                                       22
Notes to Consolidated Financial Statements                                 23-31
Quarterly Financial Data (unaudited)                                       31


                                       16
<PAGE>


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Innovex, Inc.


We have audited the accompanying consolidated balance sheets of Innovex, Inc.
and Subsidiaries as of September 30, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Innovex, Inc. and
Subsidiaries as of September 30, 2000 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2000, in conformity with accounting principles generally
accepted in the United States of America.

We have also audited Schedule II of Innovex, Inc. and Subsidiaries to Form 10-K
for each of the three years in the period ended September 30, 2000. In our
opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.

                                       \s\ Grant Thornton LLP


Minneapolis, Minnesota
November 3, 2000


                                       17
<PAGE>


CONSOLIDATED BALANCE SHEETS
INNOVEX, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                 September 30,
Assets                                                      2000              1999
---------------------------------------------------------------------------------------
<S>                                                     <C>               <C>
Current assets:
  Cash and equivalents                                  $  1,673,486      $  6,231,430
  Short-term investments                                       5,000        19,310,000
  Accounts receivable, less allowance for doubtful
    accounts of $668,000 (1999 - $1,825,000)              23,834,538        28,498,621
  Inventories                                             21,570,553        15,891,945
  Income taxes receivable                                  2,182,924                --
  Other                                                    7,311,184         6,385,053
                                                    -----------------------------------
    Total current assets                                  56,577,685        76,317,049

Property, plant and equipment - at cost:
  Land and land improvements                               3,910,885         3,060,441
  Buildings and leasehold improvements                    41,876,806        26,565,421
  Machinery and equipment                                 57,320,757        67,125,169
  Office furniture and fixtures                            9,366,134         9,147,491
                                                    -----------------------------------
                                                         112,474,582       105,898,522
  Less accumulated depreciation and amortization          17,954,656        18,740,285
                                                    -----------------------------------
    Net property, plant and equipment                     94,519,926        87,158,237

Intangible assets, net of accumulated
  amortization of $1,326,000 (1999 - $506,000)             7,089,649         4,841,025
Deferred income taxes                                      9,445,162        10,442,908
Other assets                                                  47,470            46,905
                                                    -----------------------------------
                                                        $167,679,892      $178,806,124
                                                    ===================================

Liabilities and Stockholders' Equity
---------------------------------------------------------------------------------------
Current liabilities:
  Current maturities of long-term debt                  $  7,198,411      $    307,702
  Line of credit                                           9,700,000         9,163,931
  Accounts payable                                        24,872,142        25,104,517
  Accrued compensation                                     2,173,881           932,573
  Income taxes payable                                            --           592,264
  Other accrued liabilities                                6,336,127         9,195,392
                                                    -----------------------------------
    Total current liabilities                             50,280,561        45,296,379

Long-term debt, less current maturities                   21,003,284        26,375,546
Commitments and contingencies                                     --                --

Stockholders' equity:
  Common stock, $.04 par value; 30,000,000 shares
    authorized, 14,930,286 shares issued and
    outstanding (1999 - 14,822,104)                          597,211           592,884
  Capital in excess of par value                          17,086,609        16,181,730
  Retained earnings                                       78,712,227        90,359,585
                                                    -----------------------------------
    Total stockholders' equity                            96,396,047       107,134,199
                                                    -----------------------------------
                                                        $167,679,892      $178,806,124
                                                    ===================================
</TABLE>

The accompanying notes are an integral part of these statements.


                                       18
<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS
INNOVEX, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                 For the years ended September 30,
                                                           2000                1999                1998
------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>
Net Sales                                             $ 164,461,510       $ 103,197,766       $  96,277,930

Costs and Expenses:
  Cost of sales                                         139,842,670          76,277,451          64,225,956
  Selling, general and administrative                    16,088,830           9,787,555           7,372,209
  Engineering                                             7,730,571           4,580,774           4,148,895
  Asset impairment                                        6,605,357           1,762,916                  --
  Restructuring charges                                   6,995,800           2,697,654                  --
  Interest expense                                        3,193,158             467,050              68,510
  Interest income                                          (524,300)         (2,034,500)         (2,029,496)
  Other (income) expense                                     99,029             420,332            (162,223)
                                                   ---------------------------------------------------------
                                                        180,031,115          93,959,232          73,623,851
                                                   ---------------------------------------------------------

Income (Loss) Before Provision For Income Taxes         (15,569,605)          9,238,534          22,654,079
Provision For Income Taxes                                4,515,195          (2,680,000)         (6,743,000)
                                                   ---------------------------------------------------------
Net Income (Loss)                                     ($ 11,054,410)      $   6,558,534       $  15,911,079
                                                   =========================================================

Net Income (Loss) Per Share:
  Basic                                               ($       0.75)      $        0.44       $        1.08
                                                   =========================================================
  Diluted                                             ($       0.75)      $        0.44       $        1.05
                                                   =========================================================

Common and Common Equivalent Shares Outstanding:
  Basic                                                  14,838,082          14,798,442          14,695,214
  Diluted                                                14,838,082          15,071,229          15,125,790
                                                   =========================================================
</TABLE>

The accompanying notes are an integral part of these statements.


                                       19
<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
INNOVEX, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                          Capital in                           Total
                                                           Common         Excess of         Retained       Stockholders'
For the years ended September 30, 2000, 1999 and 1998       Stock         Par Value         Earnings           Equity
-------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>               <C>
Balance at October 1, 1997                             $     584,780    $  14,065,186    $  72,167,408     $  86,817,374

Shares issued through exercise of stock options                6,404        1,120,359               --         1,126,763
Tax benefits derived from exercise of stock options               --          546,805               --           546,805
Dividends paid ($0.135 per share)                                 --               --       (1,983,961)       (1,983,961)
Net income                                                        --               --       15,911,079        15,911,079
                                                     --------------------------------------------------------------------
Balances at September 30, 1998                               591,184       15,732,350       86,094,526       102,418,060

Shares issued through exercise of stock options                1,700          373,451               --           375,151
Tax benefits derived from exercise of stock options               --           75,929               --            75,929
Dividends paid ($0.155 per share)                                 --               --       (2,293,475)       (2,293,475)
Net income                                                        --               --        6,558,534         6,558,534
                                                     --------------------------------------------------------------------
Balances at September 30, 1999                               592,884       16,181,730       90,359,585       107,134,199

Shares issued through exercise of stock options                3,902          639,243               --           643,145
Tax benefits derived from exercise of stock options                           179,058               --           179,058
Shares issued through employee stock purchase plan               425           86,578               --            87,003
Dividends paid ($0.04 per share)                                  --               --         (592,948)         (592,948)
Net loss                                                          --               --      (11,054,410)      (11,054,410)
                                                     --------------------------------------------------------------------
Balances at September 30, 2000                         $     597,211    $  17,086,609    $  78,712,227     $  96,396,047
                                                     ====================================================================
</TABLE>

The accompanying notes are an integral part of these statements.


                                       20
<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS
INNOVEX, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                   For the years ended September 30,
                                                                2000             1999             1998
-----------------------------------------------------------------------------------------------------------
<S>                                                         <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                         $(11,054,410)    $  6,558,534     $ 15,911,079
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
    Depreciation and amortization                             11,617,362        7,197,982        6,960,581
    Deferred income taxes                                      2,078,647          742,106          992,927
    Restructuring charges                                     13,601,157        4,460,570               --
    Other non-cash items                                        (833,546)        (123,483)         540,564
    Changes in operating assets and liabilities, net of
        business acquisitions and restructurings:
          Accounts receivable                                  4,482,715         (562,137)      11,121,212
          Inventories                                         (6,008,555)        (262,769)       1,094,814
          Other current assets                                (2,007,031)       1,637,335         (609,670)
          Accounts payable                                      (232,375)       6,252,826         (921,974)
          Other current and long-term liabilities             (8,102,443)        (937,869)      (1,626,823)
          Income taxes                                        (2,775,188)       1,251,809       (1,255,954)
                                                        ---------------------------------------------------
Net cash provided by operating activities                        766,333       26,214,904       32,206,756

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                       (23,887,714)     (22,598,839)     (12,730,141)
  Business acquisition                                        (3,750,000)     (35,967,038)              --
  Proceeds from sale of assets                                   713,549        2,109,467        1,169,936
  Purchase of held-to-maturity securities                             --      (31,090,000)     (44,749,000)
  Sales and maturities of held-to-maturity securities         19,305,000       52,214,000       32,755,000
  Other assets                                                   (75,886)              --               --
                                                        ---------------------------------------------------
Net cash used in investing activities                         (7,695,051)     (35,332,410)     (23,554,205)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on long-term debt                          (889,342)        (669,654)        (216,709)
  Payment of bank debt acquired in business acquisition               --      (33,248,281)              --
  Net proceeds on line of credit                                 536,069        9,163,931               --
  Issuance of long-term debt                                   2,407,789       25,000,000               --
  Proceeds from exercise of stock options                        822,203          375,151        1,126,763
  Proceeds from employee stock purchase plan                      87,003               --               --
  Dividends paid                                                (592,948)      (2,293,475)      (1,983,961)
                                                        ---------------------------------------------------
Net cash provided by (used in) financing activities            2,370,774       (1,672,328)      (1,073,907)
                                                        ---------------------------------------------------
Increase (decrease) in cash and equivalents                   (4,557,944)     (10,789,834)       7,578,644
Cash and equivalents at beginning of year                      6,231,430       17,021,264        9,442,620
                                                        ---------------------------------------------------
Cash and equivalents at end of year                         $  1,673,486     $  6,231,430     $ 17,021,264
                                                        ===================================================
</TABLE>

SUPPLEMENTAL DISCLOSURES:
Cash paid for interest was approximately $2,743,000; $895,000 and $66,000 in
2000, 1999 and 1998.

Income tax payments were approximately $0; $2,181,000 and $7,005,000 in 2000,
1999 and 1998.

Tax benefits derived from exercise of stock options totaling approximately
$179,000; $76,000 and $547,000 in 2000, 1999 and 1998 were recorded as a
reduction of current income taxes payable and an increase in capital in excess
of par value.

The accompanying notes are an integral part of these statements.


                                       21
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INNOVEX, INC. AND SUBSIDIARIES
September 30, 2000, 1999 and 1998

NOTE A. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company is a diversified manufacturer of electrical components for the
computer, network systems, consumer, medical, telecommunications and other
electronic industries. Substantially all of the Company's revenues, operating
profits (losses) and assets relate to one operating unit involved in the
manufacture of flexible circuit interconnects. Company customers are located
throughout the United States, Europe and the Pacific Rim. The Company has
manufacturing facilities in Chandler, Arizona; Litchfield and Maple Plain,
Minnesota and Thailand.

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:

PRINCIPLES OF CONSOLIDATION AND FISCAL YEAR - The consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.

The Company utilizes a fiscal year that ends on the Saturday nearest to
September 30. For clarity of presentation, the Company has described all periods
as if the year ended September 30. The fiscal years ended September 30, 2000,
1999 and 1998 include fifty-two weeks, fifty-two weeks and fifty-three weeks of
operations.

FOREIGN CURRENCY TRANSLATION - The Company uses the United States Dollar as its
functional currency for its subsidiaries in Mexico and Thailand. Remeasurement
gains and losses, resulting from the process of remeasuring the financial
statements of these foreign subsidiaries into U.S. Dollars, are included in
operations.

FOREIGN EXCHANGE INSTRUMENTS - The Company enters into short-term forward
foreign currency exchange contracts in the regular course of business to manage
its exposure against foreign currency fluctuations, primarily relating to
nonfunctional currency monetary assets and liabilities. The forward exchange
contracts generally require the Company to exchange Thailand Baht for U.S.
dollars or U.S. Dollars for foreign currencies at maturity, at rates agreed to
at inception of the contracts. The gains or losses on hedges of transaction
exposure are included in income in the period in which the exchange rates
change. The gains and losses on unhedged foreign currency transactions are
included in income. At September 30, 2000, the Company had open forward exchange
sale contracts totaling 280,000,000 Thailand Baht, approximately $6.4 million,
maturing through October 27, 2000. At September 30, 1999, there were no open
forward currency exchange contracts. The Company does not enter into forward
contracts for trading purposes.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - The Company considers all highly
liquid temporary investments with an original maturity of three months or less
to be cash equivalents. Cash equivalents, which consist of money market funds
and weekly put bonds, totaled $1,559,000 at September 30, 1999 and are recorded
at cost, which approximates market value. Debt securities have been classified
as held-to-maturity securities, which are reported at amortized cost.

ACCOUNTS RECEIVABLE - The Company grants credit to customers in the normal
course of business, but generally does not require collateral or any other
security to support amounts due. Management performs ongoing credit evaluations
of customers. The Company maintains allowances for potential credit losses.

INVENTORIES - Inventories are stated at the lower of cost or market, with cost
determined by the first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT - Depreciation is provided using the straight-line
method over the estimated useful lives of the assets for financial reporting and
accelerated methods for tax purposes. Estimated service lives range from 5 to 30
years for buildings and leasehold improvements, from 2 to 7 years for machinery
and equipment and from 3 to 7 years for office furniture and fixtures.

INTANGIBLE ASSETS - Intangible assets include goodwill, patents, licenses,
technology and trademarks, which are capitalized at cost and amortized on the
straight-line basis over their estimated useful lives. Useful lives range from 3
to 10 years. Management reviews the valuation and amortization of goodwill on an
ongoing basis. As part of this review, management estimates the value and future
benefits of the net income to be generated by the businesses acquired to
determine whether an impairment of goodwill has occurred.

NET INCOME (LOSS) PER SHARE - The Company's basic net income (loss) per share is
computed by dividing net income (loss) by the weighted average number of
outstanding common shares. The Company's diluted net income (loss) per share is
computed by dividing net income (loss) by the weighted average number of
outstanding common shares and common share equivalents related to stock options,
when dilutive. Options to purchase 631,543, 193,650 and 196,250 shares of common
stock with weighted average exercise purchase


                                       22
<PAGE>


prices of $15.20, $25.71 and $28.76 were outstanding during 2000, 1999 and 1998,
but were excluded from the computation of common share equivalents because they
were antidilutive.

REVENUE RECOGNITION - Sales are recorded at the time of shipment and provision
for anticipated returns, net of exchanges, is recorded based on historical
experience.

USE OF ESTIMATES - Preparation of the Company's consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect reported amounts of assets and liabilities and related revenues and
expenses and disclosure about contingent assets and liabilities at the date of
financial statements. Actual results could differ from these estimates.

STOCK BASED COMPENSATION - The Company utilizes the intrinsic value method of
accounting for its employee stock based compensation plans. Pro forma
information related to the fair value based method of accounting is contained in
Note F.

RECLASSIFICATIONS - Certain 1999 amounts have been reclassified to conform with
2000 presentation.

NEW PRONOUNCEMENTS - The Financial Accounting Standards Board ("FASB") issued
FASB Interpretation 44, INTERPRETATION OF APB OPINION 25 ("FIN 44") in March
2000. FIN 44 provides an interpretation of APB Opinion 25 on accounting for
employee stock compensation and describes its application to certain
transactions. FIN 44 was effective on July 1, 2000. It applies on a prospective
basis to events occurring after that date, except for certain transactions
involving options granted to non-employees, repriced options, and modifications
to add reload option features, which apply to awards granted after December 31,
1998. The provisions of FIN 44 did not have a material effect on options entered
into through September 30, 2000.

The FASB has also issued Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities" which is
effective for fiscal years beginning after June 15, 2000. SFAS 133 requires
entities to recognize all derivatives in their financial statements as either
assets or liabilities measured at fair value. SFAS 133 also specifies new
methods of accounting for derivatives used in risk management strategies
(hedging activities), prescribes the items and transactions that may be hedged,
and specifies detailed criteria required to qualify for hedge accounting.
Management believes the adoption of SFAS 133 will not have a material effect on
the consolidated financial statements of the Company.

NOTE B. - BUSINESS ACQUISITION

On October 3, 1999, the Company purchased the assets of its Thailand
subcontractor for a total of $3,750,000. The purchase price included $757,000
allocated to property, plant and equipment and $2,993,000 allocated to goodwill
and amortized on a straight line basis over 10 years.

On August 9, 1999, the Company purchased 76% of the outstanding shares of common
stock of ADFlex Solutions, Inc.("ADFlex"). The remaining 24% of the shares
outstanding were purchased on September 14, 1999. The $37.2 million purchase
price, includes change in control payments of $1.9 million and transaction costs
of $.9 million. The purchase price was paid in the form of cash. Pursuant to the
purchase agreement, the Company was required to pay off all outstanding balances
under that certain Credit Agreement among ADFlex, BankBoston N.A. and Bank
Boston N.A. as Agent for Lenders, as amended (the "Credit Agreement"). Innovex
obtained a credit facility totaling in principal amount $40 million, that was
utilized to refinance amounts owed under the Credit Agreement, pay down ADFlex's
current liabilities and pay related transaction costs. The acquisition has been
accounted for as a purchase and, accordingly, the results of operations since
acquisition are included in the accompanying financial statements. The excess
cost over the fair value of net assets acquired of $3.9 million was allocated to
goodwill and will be amortized on a straight-line basis over 10 years. The
purchase price and fair value of the assets acquired were as follows (in
thousands of dollars):

Current assets                              $33,687
Property, plant and equipment                46,163
Intangible assets                             3,856
Deferred tax assets                          11,929
Other long-term assets                           47
Current liabilities                         (57,221)
Other long-term liabilities                  (1,294)
                                            -------
                                            $37,167
                                            =======


The following unaudited pro forma results of operations for the years ended
September 30, 1999 assume the acquisition occurred on October 1, 1998. The pro
forma information includes adjustments for depreciation based on the fair market
value of the property, plant and equipment acquired, amortization of intangibles
arising from the transaction, the reduction of interest expense to reflect the


                                       23
<PAGE>


refinancing of the ADFlex credit facility, the reduction of interest income on
cash used to complete the acquisition, the elimination of salaries of ADFlex
executives terminated in conjunction with the merger and related changes in the
provision for income tax expense (in thousands of dollars except per share
amounts):

                                               Year Ended
                                                  1999
---------------------------------------------------------
Net sales                                       $215,975
Net loss                                          (6,845)
Net loss per share:
  Basic                                           $(0.46)
  Diluted                                         $(0.46)

The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
on the assumed date, nor are they necessarily indicative of future operating
results.

NOTE C. - SHORT-TERM INVESTMENTS

Short-term investments consist primarily of a diversified portfolio of tax
exempt municipal bonds that are classified as held-to-maturity securities at
September 30, 1999. As of September 30, 1999, a significant portion of the
short-term investments had maturities within one year. Gross realized and
unrealized gains and losses related to these securities were not material.
Proceeds from sales of held-to-maturity securities during 2000, with an
amortized cost of $5,684,000, were $5,651,000. During 1999, held-to-maturity
securities with an amortized cost of $5,119,022, were sold for proceeds of
$5,104,765. Net realized losses on the sale of these securities were immaterial.
These proceeds were used to fund capital expenditures during fiscal 2000 and to
complete the ADFlex acquisition on August 9 and September 14, 1999.

NOTE D. - INVENTORIES

Inventories are comprised of the following at September 30:

                                                 2000             1999
                                           --------------------------------
Raw materials and purchased parts             $11,803,667       $8,753,336
Work-in-process and finished goods              9,766,886        7,138,609
                                           --------------------------------
                                              $21,570,553      $15,891,945
                                           ================================

NOTE E. - LINE OF CREDIT AND LONG-TERM DEBT

On September 15, 1999 the Company entered into a new credit facility arranged by
Norwest Bank Minnesota N.A. which includes U.S. Bank N.A. as an additional
lender. The facility was put in place to pay off all outstanding balances
existing at the time of the ADFlex acquisition under the Credit Agreement among
ADFlex, BankBoston N.A. and Bank Boston N.A. as Agent for Lenders, as amended,
as required by the ADFlex merger agreement. The credit facility consists of a
$15.0 million, five-year revolving line of credit and a $25.0 million, five-year
term loan with equal principal payments due each quarter commencing on October
1, 2000 and continuing through the September 14, 2004 maturity date. Under the
terms of the credit facility, any outstanding balance bears interest at Norwest
Minnesota, N.A.'s prime interest rate plus an applicable margin ranging from 0
to .25% or LIBOR plus an applicable margin ranging from 1.25% to 3.0% based on
the Company achieving certain financial objectives at the end of each quarter.
The credit facility is collateralized by all accounts receivable, inventory,
equipment and general intangibles of the Company. The Company is required, under
the credit agreement, to maintain certain financial ratios and meet certain net
worth and indebtedness tests for which the Company is in compliance at September
30, 2000. At September 30, 2000, $25.0 million was outstanding under the term
loan and $9.7 million was outstanding under the revolving line of credit. At
September 30, 1999, $25.0 million was outstanding under the term loan and $9.2
million was outstanding under the revolving line of credit. The interest rate
for the term loan was 9.69% at September 30, 2000 and the rates for the
revolving line of credit ranged from 9.65% to 10.75% at September 30, 2000.

Other long-term debt consists of capitalized leases of equipment. Net assets
under capital lease as of September 30, 2000 are approximately $2.8 million.
Interest rates on these range from 7.7% to 10.5%. Aggregate maturities of
long-term debt including capitalized leases for the next five years are as
follows (in thousands): 2001 - $7,198; 2002 - $6,859; 2003 - $6,854; 2004 -
$6,859; 2005 - $431. The recorded value of long-term debt approximates fair
market value.


                                       24
<PAGE>


NOTE F. - STOCKHOLDERS' EQUITY

Stock Option Plans -

The Company has stock option plans that provide for incentive and non-qualified
stock options to be granted to directors, officers and other key employees or
consultants. The stock options granted generally have a ten-year life, vest over
periods from six months to five years, and have an exercise price equal to the
fair market value of the stock on the date of grant. At September 30, 2000, the
Company had 439,870 shares of common stock available for issue under the plans.

Transactions under the plans during each of the three years in the period ending
September 30, 2000 are summarized as follows:

                                                   Number of         Weighted
                                                    Shares           Average
                                                     Under           Exercise
                                                    Option            Price
--------------------------------------------------------------------------------
Outstanding at October 1, 1997                      944,464            8.92

Granted                                             187,750           28.52
Forfeited                                          (137,300)          13.39
Exercised                                          (160,100)           7.04
-------------------------------------------------------------
Balance at September 30, 1998                       834,814           12.95

Granted                                             459,400           12.10
Forfeited                                          (113,300)          18.29
Exercised                                           (42,500)           8.83
-------------------------------------------------------------
Balance at September 30, 1999                     1,138,414           12.23

Granted                                             546,750            8.33
Forfeited                                          (196,570)          10.86
Exercised                                           (97,646)           6.38
-------------------------------------------------------------
Balance at September 30, 2000                     1,390,948           11.30
                                                 ============

Options exercisable at September 30:
                                                                     Weighted
                                                                     Average
                                                     Number          Exercise
                                                  Exercisable         Price
                                                 -------------------------------
1998                                                270,564           $7.97
1999                                                434,114            9.25
2000                                                499,908           11.20

The following table summarizes information concerning currently outstanding and
exercisable stock options:

                            Options Outstanding            Options Exercisable
                            -------------------            -------------------
                                 Weighted
                                  Average       Weighted                Weighted
                                 Remaining      Average                 Average
   Range of          Number     Contractual     Exercise    Number      Exercise
Exercise Prices   Outstanding       Life         Price    Exercisable    Price
--------------------------------------------------------------------------------
 $0.33 - $3.46       20,598        3.9 years     $ 2.01      20,598      $2.01
  6.49 -  8.72      602,200        7.5 years       7.65     233,700       7.37
  8.91 - 11.50      550,450        7.5 years      10.96     168,510      10.70
 11.53 - 16.26       82,300        9.0 years      14.20      10,700      14.84
 18.88 - 32.44      135,400        7.0 years      28.60      66,400      28.19
--------------------------------------------------------------------------------
                  1,390,948                                 499,908
                ===========                              ==========


                                       25
<PAGE>


The Company's 2000, 1999 and 1998 pro forma net income (loss) and diluted net
income (loss) per share would have been ($11,927,000), $5,871,000, and
$15,307,000 or ($0.82), $0.39 and $1.02 had the fair value method been used for
valuing options granted during those years. The impact on net income may differ
in future disclosures because they do not take into effect pro forma
compensation expense related to grants made before 1996. The weighted average
value of options granted in 2000, 1999 and 1998 was $4.26, $4.68 and $12.35. The
value was computed by applying the following weighted average assumptions to the
Black Scholes options pricing model: volatility of 54%, 51% and 53%; dividend
yield of 0.0%, 1.2% and 0.4%; risk-free rate of return of 6.1%, 4.5% and 6.0%;
and an average term of 4.5 for 2000 and 3.5 years for 1999 and 1998.

Employee Stock Purchase Plan -

During fiscal 2000, the Company established an Employee Stock Purchase Plan
(ESPP) which is available to eligible employees. Under terms of the plan,
eligible employees may designate from 1% to 10% of their compensation to be
withheld through payroll deductions for the purchase of common stock at 85% of
the lower of the market price on the first or last day of the offering period.
Under the plan, 250,000 shares of common stock have been reserved for issuance.
As of September 30, 2000, 10,636 shares have been issued under the plan. Fair
value disclosures under SFAS No. 123 have not been disclosed for shares under
the ESPP as such values are immaterial.

NOTE G. - INCOME TAXES

The effective income tax rates differed from the federal statutory income tax
rate as follows for the years ended September 30:

                                       2000      1999     1998
----------------------------------------------------------------
Federal statutory rate                (34.0%)    34.0%    34.6%
State income taxes                     (5.6)      3.1      1.8
FSC benefit                            (4.4)     (9.2)    (6.2)
Foreign operating income benefit       (4.0)       --       --
Tax exempt interest                    (0.8)     (6.8)    (2.8)
Allowances                             16.2        --       --
Additional income tax accrual           1.6       6.8      1.9
Other                                   2.0       1.1      0.5
                                    ----------------------------
                                      (29.0%)    29.0%    29.8%
                                    ============================

The Company was able to apply a portion of its current year loss before income
taxes against prior years' income. The additional loss carryforward of
approximately $9.2 million which expires 2020 has been reflected as deferred
assets, and is partially off-set by a valuation allowance, because its
realization is not assured.

Components of the provision for income taxes are as follows for the years ended
September 30 (thousands of dollars):

                                      2000         1999       1998
--------------------------------------------------------------------
Current:
  Federal                           ($5,284)      $1,702     $5,128
  State                              (1,310)         236        622
                                  ----------------------------------
                                     (6,594)       1,938      5,750
Deferred                              2,079          742        993
                                  ----------------------------------
                                    ($4,515)      $2,680     $6,743
                                  ==================================


                                       26
<PAGE>


The cumulative temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial statement purposes are as
follows at September 30 (thousands of dollars):

                                                  2000         1999
---------------------------------------------------------------------
Current deferred tax assets:
  Inventories                                    $   948     $ 1,638
  Receivables                                         47         447
  Compensation and benefits                          331         329
  Restructuring                                      738         893
  Other                                              302         140
                                              -----------------------
                                                 $ 2,366     $ 3,447
                                              =======================
Long-term deferred tax assets (liabilities) - net:
  Accelerated depreciation                       $(5,330)    $(2,914)
  Intangibles                                     10,299       9,758
  Tax credit and NOL carryforwards                 9,857       3,599
  Allowances                                      (5,381)         --
                                              -----------------------
                                                 $ 9,445     $10,443
                                              =======================

In connection with the ADFlex acquisition, the Company previously recognized
deferred tax assets representing net operating losses of $9.9 million expiring
in 2018. During the current year, the Company recognized $7.9 million of
additional net operating losses off-set by valuation allowances because the
utilization of the losses is not assured.

NOTE H. - RETIREMENT AND PROFIT-SHARING PLANS

The Company sponsors a 401K retirement plan for all of its employees meeting
minimum eligibility requirements. The plan provides Company matching
contributions of 50% of the first 6% of employee contributions to the plan. An
additional 401K retirement plan was also in effect for the last 8 weeks of
fiscal 1999 and the first 13 weeks of fiscal 2000 relating to the ADFlex
acquisition. This plan was sponsored for all employees of the ADFlex's United
States operation. Under this plan, the Company made contributions each year up
to a maximum of 4% of an employee's total compensation. The Company merged the
ADFlex plan into the Company plan on December 31, 1999. Company contributions
for both these plans were approximately $547,000, $385,000 and $435,000 for the
years ended September 30, 2000, 1999 and 1998.

NOTE I. - RESEARCH AND DEVELOPMENT COSTS

The Company incurred research and development costs of approximately $3,472,000,
$2,878,000 and $2,356,000 for the years ended September 30, 2000, 1999 and 1998.

NOTE J. - FOREIGN OPERATIONS AND SIGNIFICANT CUSTOMERS

Prior to the September 1999 ADFlex acquisition, the Company had no foreign-based
operations; however, the Company utilized subcontractors in Thailand and China
to perform certain labor intensive procedures on a large portion of its
products. As part of the ADFlex acquisition, the Company acquired an Asian
operation, located in Lamphun, Thailand. The Company will continue to increase
the functions performed at this location in order to take advantage of the
proximity to customers and favorable labor and operating costs. In addition, the
Company purchased the assets of its Thailand subcontractor in October 1999. The
Company had aggregate export sales of approximately $119,603,000, $76,607,000
and $79,957,000 for the years ending September 30, 2000, 1999 and 1998,
principally to Pacific Rim customers. With respect to foreign operations for the
years ended September 30, 2000 and 1999, long-lived assets of approximately
$27,658,000 and $15,061,000 were located in Thailand and $4,313,000 and
$12,308,000 were located Mexico, respectively.

Revenues from four customers made up a significant portion of the Company's
total net sales during the years ending September 30:

                       2000         1999         1998
                    -----------------------------------
Customer A              33%          40%           28%
Customer B               8           10            14
Customer C               6           14            20
Customer D               -            1            12


                                       27
<PAGE>


Accounts receivable from the above four customers are 54% and 29% of the
Company's accounts receivable at September 30, 2000 and 1999.

NOTE K. - COMMITMENTS AND CONTINGENCIES

The Company leases facilities and equipment under operating leases that expire
at various dates through November 2003. As of September 30, 2000, the future
minimum lease commitments under the operating leases are payable as follows (in
thousands): 2001 - $1,052; 2002 - $953; 2003 - $734; 2004 - $128; 2005 - $2. The
Company also entered into a $5.7 million six year term operating lease facility
which is expected to begin in December 2000.

The nature of the Company's business exposes the Company to potential
environmental remediation liabilities arising from the manufacture, use and
disposal of hazardous materials used to manufacture flex interconnect products.
Management believes that any cost associated with maintaining the Company's
compliance with current environmental remediation laws will not have a material
adverse effect on the Company's financial statements.

NOTE L. - RESTRUCTURING CHARGES

Manufacturing operations restructuring-
The fiscal 2000 first quarter includes a $13,785,085 restructuring charge
related to restructuring the Company's manufacturing operations. The
restructuring is primarily related to moving operations from the Company's Agua
Prieta, Mexico facility to its new facility in Lamphun, Thailand. The charge was
recorded pursuant to a plan announced in November 1999. The charge included
approximately $6,605,000 related to asset impairment of property and equipment,
$356,000 for the write off of inventory and supplies, $176,000 for increasing
the accounts receivable reserve, and accrued liabilities of $2,101,000 for
facility abandonment costs and $4,547,000 in employee severance and benefits.
The company expected approximately 2,100 employees to be terminated as a result
of the restructuring, primarily in the Agua Prieta, Mexico facility. The
restructuring was substantially complete as of September 2000 with the exception
of completing the disposition of the Mexico facility. During the fourth quarter
of fiscal 2000, the Company had a change in estimate of employee termination
benefits. The change from the original estimate is due to higher turnover than
projected. The Company believes the accrual at September 30, 2000 is adequate to
finalize severance payments. The Company also increased its facility abandonment
charges due to additional costs relating to the disposition of the facility
located in Agua Prieta, Mexico.

Lead wire assembly product line disposition-
During the fourth quarter of fiscal 1999, the Company recorded a charge of
approximately $2,765,000 related to the discontinuation of the lead wire
assembly product line. The charge included approximately $871,000 related to
asset impairment, $1,403,000 for the write off of inventory and supplies,
$197,000 in employee severance, $156,000 in facility abandonment costs and
$138,000 to increase the accounts receivable reserve. The disposition was
substantially completed by June 30, 2000. The restructuring charge was reduced
by $184,000 in the third quarter of fiscal 2000 as a result of a change in the
estimated liability.

Iconovex Division disposition-
The 1999 results also include a $1,695,000 restructuring charge associated with
the disposition of the Iconovex Division and its 51% owned joint venture, Smart
Solution. This charge was recorded in June 1999 when all operations were ceased
and announced in July 1999. The charge included $801,000 for prepaid expenses,
$779,000 for intangible assets including capitalized software, $14,000 in
employee severance and $101,000 for administrative costs. As of September 30,
1999, all amounts relating to this restructuring had been paid.

The remaining restructuring accrual as of September 30, 2000 totaled $1,726,000.
Selected information regarding the restructuring follows (in thousands):

<TABLE>
<CAPTION>
                                      Lead Wire Assembly Product        Manufacturing Operations
                                           Line Disposition                   Restructuring

                                       Facility        Employee         Facility        Employee
                                     Abandonment     Termination       Abandonment    Termination
                                       Charges         Benefits          Charges        Benefits     Total
                                  -------------------------------------------------------------------------
<S>                                        <C>            <C>             <C>            <C>        <C>
   Accrual at September 30, 1999           $156           $197               $--            $--       $353
     Establishment of accrual                --             --             2,101          4,547      6,648
     Payments                                (3)          (152)           (2,124)        (2,812)    (5,091)
     Change in estimate                    (153)            19             1,435         (1,485)      (184)
                                  -------------------------------------------------------------------------
   Accrual remaining at
       September 30, 2000                   $--            $64            $1,412           $250     $1,726
                                  -------------------------------------------------------------------------
</TABLE>


                                       28
<PAGE>


<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
(Unaudited)
2000                                   1st Quarter*     2nd Quarter    3rd Quarter    4th Quarter         Year
-------------------------------------------------------------------------------------------------------------------
<S>                                     <C>             <C>            <C>            <C>             <C>
Net sales                               $44,724,625     $41,388,132    $38,433,243    $17,865,262     $164,461,510
Gross profit                              4,715,176       4,646,758      6,773,058      4,695,655       24,618,840
Net income (loss)                       (11,169,262)     (1,156,638)       392,544      1,964,611      (11,054,410)
Net income (loss) per share:
  Basic                                      ($0.75)         ($0.08)         $0.03          $0.13           ($0.75)
  Diluted                                    ($0.75)         ($0.08)         $0.03          $0.13           ($0.75)
</TABLE>

*The first quarter includes restructuring charges of $13,785,000 related to the
restructuring of the Company's manufacturing operations.

<TABLE>
<CAPTION>
1999                                    1st Quarter     2nd Quarter  3rd Quarter**  4th Quarter**         Year
<S>                                     <C>             <C>            <C>            <C>             <C>
Net sales                               $22,027,861     $20,703,779    $20,636,068    $39,830,058     $103,197,766
Gross profit                              7,076,533       6,785,131      6,322,225      6,736,426       26,920,315
Net income (loss)                         2,994,767       2,539,101      1,509,671       (485,004)       6,558,534
Net income (loss) per share:
  Basic                                       $0.20           $0.17          $0.10         $(0.03)           $0.44
  Diluted                                     $0.20           $0.17          $0.10         $(0.03)           $0.44
</TABLE>

**The third-quarter includes restructuring charges of $1,695,000 related to the
disposition of Iconovex, Innovex's software division and the fourth-quarter
includes $2,765,000 related to the discontinuation of the lead wire assembly
product line.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Reference is made to the section entitled "Election of Directors" in the
Registrant's definitive proxy statement to be mailed to shareholders on or about
December 15, 2000, and filed with the Securities and Exchange Commission.
Information on executive officers is set forth in Part I, Item 4A hereto.


ITEM 11. EXECUTIVE COMPENSATION

Reference is made to the section entitled "Executive Compensation" and "Election
of Directors" in the Registrant's definitive proxy statement to be mailed to the
Shareholders on or about December 15, 2000, and filed with the Securities and
Exchange Commission.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Reference is made to the section entitled "Security Ownership of Certain
Beneficial Owners and Management" and "Election of Directors" in the
Registrant's definitive proxy statement to be mailed to Shareholders on or about
December 15, 2000, and filed with the Securities and Exchange Commission.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is made to the section entitled "Certain Transactions" in the
Registrant's definitive proxy statement to be mailed to Shareholders on or about
December 15, 2000, and filed with the Securities and Exchange Commission.


                                       29
<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
        (1)     FINANCIAL STATEMENTS                                     Page(s)
                --------------------                                     -------
                The following Consolidated Financial Statements of the
                Registrant, Innovex, Inc. and subsidiaries, are included
                in Item 8:
                *   Consolidated Balance Sheets at September 30, 2000 and
                    1999...................................................   19
                *   Consolidated Statements of Operations for each of the
                    three years in the period ended September 30, 2000 ....   20
                *   Consolidated Statements of Stockholders' Equity for
                    each of the three years in the period ended September
                    30, 2000...............................................   21
                *   Consolidated Statements of Cash Flows for each of the
                    three years in the period ended September 30, 2000 ....   22
                *   Notes to Consolidated Financial Statements ............23-31

        (2)     FINANCIAL STATEMENT SCHEDULES
                -----------------------------
                Schedule II - Valuation and Qualifying Accounts for the
                three years ended September 30, 2000 ......................   35
                ALL OTHER SCHEDULES FOR WHICH PROVISION IS MADE IN THE
                APPLICABLE ACCOUNTING REGULATION OF THE SECURITIES AND
                EXCHANGE COMMISSION HAVE BEEN OMITTED BECAUSE THEY ARE
                NOT REQUIRED, ARE INAPPLICABLE OR THE INFORMATION IS
                INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS OR
                NOTES THERETO.

        (3)     EXHIBITS
                --------
        3(a)    Articles of Incorporation, as amended, are incorporated
                        by reference to Exhibit 3 of the Registrant's
                        Form 10Q for the Quarter Ended December 31, 1996.
        3(b)    Bylaws, as amended, are incorporated by reference to
                        Exhibit 3(b) of the Registrant's Form S-1
                        Registration Statement dated June 19, 1986
                        (Commission File No. 33-6594)....................
        10(a)   1983 Employee Incentive Stock Option Plan is incorporated
                        by reference to Exhibit 4(a) of the Registrant's
                        Form S-8 dated June 3, 1987 (Commission File
                        No. 33-14776)....................................
        10(b)   1987 Employee Stock Option Plan, as amended, is
                        incorporated by reference to Exhibit 4(a) of the
                        Registrant's Form S-8 dated March 17, 1989
                        (Commission File No. 33-27530)...................
        10(c)   Innovex, Inc. and Subsidiaries Employees' Retirement
                        Plan is incorporated by reference to Exhibit
                        10(i) of the Registrant's Form 10-K for the Year
                        Ended September 30, 1992.........................
        10(d)   1994 Stock Option Plan, as amended, is incorporated by
                        reference to Exhibit 4.1 of the Registrant's
                        Form S-8 dated May 27, 1999 (Commission File No.
                        333-79427).......................................
        10(e)   Innovex, Inc. Employee Stock Purchase Plan is
                        incorporated by reference to Exhibit 4.1 of the
                        Registrant's Form S-8 dated May 19, 2000
                        (Commission File No. 333-37380)..................
        10(f)   Form of Employment Agreement between certain executive
                        officers and the Company is incorporated by
                        reference to Exhibit 10(g) of the Registrant's
                        Form 10-K for the year ended September 30, 1996..
        10(g)   Agreement and Plan of Merger, dated July 1, 1999, by and
                        among ADFlex Solutions, Inc. and Innovex, Inc.
                        and Innovex Acquisition Corp. is incorporated by
                        reference to Exhibit (c)(1) of the Registrant's
                        Schedule 14(d)(1) filed on July 7, 1999
        10(h)   Lease dated June 28, 1993 between ADFlex Solutions, Inc.
                        and TL Properties, Inc. and the First Amendment
                        to Lease, dated June 1994, incorporated by
                        reference to the ADFlex Solutions, Inc.
                        Registration Statement on Form S-1 (SEC file No.
                        33-80324) or amendments thereto, filed on June
                        16, 1994.........................................
        10(i)   Credit Agreement dated as of September 15, 1999 among
                        Innovex, Inc. as Borrower and the Banks Named
                        Herein, as Banks, and Norwest Bank Minnesota,
                        N.A., as Agent is incorporated by reference to
                        Exhibit 10(i) of the Registrant's Form 10-K for
                        the Year Ended September 30, 1999................
        10(j)   First Amendment to Credit Agreement...................... E36-61
        21      Subsidiaries of Registrant...............................    E62
        23      Consent of Grant Thornton LLP............................    E63
        27      Financial Data Schedule..................................    E64

(b) REPORTS ON FORM 8-K
        None

(c) EXHIBITS
        Reference is made to Item 14(a) 3................................

(d) SCHEDULES
        Reference is made to Item 14(a) 2................................


                                   30
<PAGE>


                               SIGNATURES

         Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                               INNOVEX, INC.


                               By \s\ William P. Murnane
                                  William P. Murnane
                                  President and Chief Executive Officer

Date December 14, 2000         By \s\ Timothy S. McIntee
                                  Timothy S. McIntee
                                  Secretary and Senior Vice President, Corporate


        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 14th day of December, 2000.


\s\ William P Murnane            President, Chief Executive Officer and Director
William P. Murnane               (principal executive officer)

\s\ Timothy S. McIntee           Secretary and Senior Vice President, Corporate
Timothy S. McIntee               (principal financial officer)

\s\ Thomas W. Haley              Chairman and Director
Thomas W. Haley

\s\ Gerald M. Bestler            Director
Gerald M. Bestler

\s\ Frank L. Farrar              Director
Frank L. Farrar

\s\ Elick Eugene Hawk            Director
Elick Eugene Hawk

\s\ William J. Miller            Director
William J. Miller

\s\ Michael C, Slagle            Director
Michael C. Slagle

\s\ Bernt M. Tessem              Director
Bernt M. Tessem


                                       31
<PAGE>


                          Innovex Inc. and Subsidiaries

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  For The Three Years Ended September 30, 2000

<TABLE>
<CAPTION>
                                                                    Charged to
                                          Balance at   Charged to     Other                      Balance at
                                          Beginning    Costs and    Accounts -    Deductions -     End of
DESCRIPTION                               of Period     Expenses     Describe      Describe        Period
                                           -------     --------      --------      --------        ------
<S>                                       <C>            <C>           <C>           <C>         <C>
Miscellaneous valuation and qualifying accounts (a)

  Year ended September 30, 2000           $2,151,000     $   --        $   --        $   --      $  797,000

  Year ended September 30, 1999           $  445,000     $   --        $   --        $   --      $2,151,000

  Year ended September 30, 1998           $  903,000     $   --        $   --        $   --      $  445,000
</TABLE>


(a) Additions, deductions and balances were not individually significant.


                                       32
<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OF

                                  INNOVEX, INC.

                                       FOR

                      FISCAL YEAR ENDED SEPTEMBER 30, 2000

              ----------------------------------------------------

                                    EXHIBITS


                                      E-33